After a truly impressive earnings report, investors are looking for the best way to play Netflix’s success.
Netflix, Inc. (NFLX) straight-up crushed expectations on its Q4 2020 earnings report on Tuesday evening.
Despite only narrowly exceeding expectations on revenue – $6.64 billion versus a $6.63 billion estimate – where the streaming entertainment giant really excelled was in new subscribers, adding 8.51 million new paying customers versus an expected 6.03 million.
In exceeding 200 million subscribers for the first time, it’s clear that the price hike in October that many thought would turn off potential subscribers hasn’t actually slowed down viewers desperate for more content.
Look, it shouldn’t come as much of a surprise that Netflix significantly grew its subscriber base over the last few months. Much of Netflix’s success in attracting new subscribers can likely be attributed to winter weather and the pandemic forcing many Americans indoors.
So what do these impressive earnings mean for Netflix’s future, and is it worth adding to your portfolio? Let’s take a look…
Where’s the money?
Netflix stock absolutely exploded on Wednesday, gaining nearly 17% by the afternoon.
That’s a huge increase, so anyone considering jumping into NFLX would naturally want to consider whether they’re topping the stock.
After all, once the weather gets warmer and most COVID-19 lockdowns are over, won’t people be spending less time in front of the TV?
While that’s probably true, there’s good reason to believe that the inroads that Netflix has made in getting so many new viewers to sign up will ultimately lead to many of them being long-term subscribers.
We already knew that Netflix is spending a fortune to develop new original content to keep the hopper full for subscribers that are devouring content at record levels. But now Netflix has announced that it will be bringing viewers a new movie every week in 2021.
The sheer volume of streaming options will inevitably lead to Netflix retaining viewers and continuing to grow a strong subscriber base, even if we do see a slight correction later this year.
But even that downtick will likely play to your advantage…
How do I get some?
I almost never recommend jumping into a stock that’s already made a huge move like the one Netflix had yesterday. And this time is no different.
Don’t get me wrong, I still love this stock, but timing your investment is important.
There are analysts that will point to the almost absurd amount of money Netflix is spending on producing content. They’ll also argue that NFLX is overvalued, but the bears have been saying that for years while Netflix stock just keeps rising.
Look, at some point investors will care about valuation and how much they spend on content but until then, stick with what works, buy NFLX on any pullback.
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In the Spotlight: Ford Hanging Tough Despite Bad News
Ford Motor Company (F) took a gut-check yesterday as the National Highway Traffic Safety Administration (NHTSA) ruled that Ford will need to recall 3 million vehicles from across its lineup due to faulty airbags.
The recall – stemming from a Takata airbag that could potentially explode and harm drivers – has affected several top automakers and has led to the largest automotive recall in history.
Despite the bad news, shares of Ford rose more than 7% yesterday as optimism for the automotive industry continues to run high.
I’m taking a good look at this space to find the best profit potentials that you should be focused on. I’ll be back with more on where you should be putting your money, right here in Profit Pregame, in the near future. Stay tuned.