Netflix Stock Price Guide: What Drives NFLX Price?

Netflix (NFLX) is a firm recognised worldwide for its entertainment innovations and strong position in the streaming industry. As such, it may hold interest for traders considering share CFDs. Let’s dive into Netflix’s history and key business metrics, as well as the major factors impacting its share value:

TL;DR

Netflix revolutionised media consumption by shifting from a DVD rental service to a digital streaming model in 2007, leading to significant growth in its subscriber base.

As of April 2024, Netflix has over 269.6 million paid memberships across more than 190 countries, demonstrating its global reach.

Beyond streaming, Netflix has expanded into mobile gaming, diversifying its entertainment offerings and adapting to industry trends.

Netflix Explained: What Is NFLX?

Netflix has significantly transformed media consumption as a subscription-based streaming service. Initially established in 1997 as a DVD rental service designed to compete with Blockbuster, Netflix shifted to a digital streaming model in 2007. This move set a new standard for home entertainment and positioned Netflix as a major player in the streaming industry.

Initially starting with a mail-order DVD service, Netflix provided an alternative to traditional video rental stores. In January 2007, nearly a decade after its inception, the company launched its on-demand streaming service, allowing subscribers to watch movies and TV shows instantly over the internet. This change marked the beginning of a new era in media consumption and led to significant growth in its subscriber base. As of April 2024, Netflix has over 269.6 million paid memberships across more than 190 countries, highlighting its global reach and appeal to diverse audiences.

A key aspect of Netflix's strategy has been its focus on original content. By producing and distributing its own films and TV series, Netflix has differentiated itself from competitors. Series like "The Witcher," "Bridgerton," and "The Umbrella Academy" have gained popularity, contributing to the platform's reputation for diverse offerings. Netflix's original productions now comprise half of its U.S. library, reflecting its strategic emphasis on self-produced content. This approach has resulted in numerous Netflix originals receiving critical acclaim and various awards.

Netflix's reach extends beyond its original DVD rental service. The platform's global accessibility, with content available in multiple languages, has solidified its position in the entertainment industry. As of October 2023, Netflix ranked as the 23rd most-visited website globally, with significant traffic from the United States, the United Kingdom, and Brazil.

In addition to streaming, Netflix has diversified its offerings by entering the video game publishing market. This expansion into mobile gaming represents a strategic effort to broaden its entertainment ecosystem and engage users across different mediums. By incorporating new forms of entertainment, Netflix continues to adapt to industry trends.

Netflix's evolution from a DVD rental service to a global streaming provider illustrates its ability to adapt and innovate. Through a combination of original content, a focus on corporate culture, and a commitment to sustainability, Netflix has played a significant role in shaping the entertainment landscape. As it continues to develop, Netflix remains focused on its mission to entertain a worldwide audience.

Netflix Market Cap Milestones

Since its Initial Public Offering (IPO) in 2002, Netflix’s market capitalisation has grown by a factor of more than 1,000. Here are a few markers along Netflix’s way to its current place among the most prominent American firms in the entertainment space:

• 2002: $220 million
• 2003: $1.12 billion
• 28/2/2011: $10.53 billion
• 30/11/2011: $3.39 billion
• 29/12/2013: $21.95 billion
• 29/6/2018: $170 billion
• 30/9/2019: $117 billion
• 13/5/2022: $77.4 billion
• 9/7/2024: $295 billion

Although these data points reflect where Netflix’s market capitalisation stood only at certain specific moments in time, the clear upward trajectory that characterised the past two decades of Netflix’s value as a company can be easily discerned. While the impact of the Great Recession may have been less crucial for Netflix’s bottom line than those of companies in other sectors, its market cap has seen a few significant falls over the years, notwithstanding the overall steady increase. Whether this trend will be borne forward into the future is anyone’s guess.

Netflix Stock Split History

Netflix has experienced significant growth since its IPO in 2002, transitioning from a DVD rental service to a leading video streaming provider. This success has been reflected in its soaring stock price and subsequent stock splits, which help keep the share price accessible. Netflix has undergone two notable stock splits in its history.

The first stock split occurred on February 12, 2004, with a 2-for-1 ratio. Leading up to this, Netflix's stock price had increased by over 1,500% from October 2002 to January 2004, reaching nearly $80 per share. This split came during a period of hyper-growth for Netflix, which saw 444,000 new trial subscribers in the fourth quarter of 2003 alone, bringing its total to nearly 1.49 million subscribers. At that time, churn rates fell below 5%, and Netflix reported a net income of $2.3 million. CEO, Reed Hastings, highlighted that the split reflected the strong and sustained growth of the company's business model.

Netflix's second stock split occurred on July 15, 2015, with a 7-for-1 ratio. This split followed another period of remarkable stock performance. After the 2008 recession, Netflix's stock price rebounded from $18 per share to over $700 per share by 2015. Despite the stock's impressive climb, Netflix held off on splitting its shares again until it was necessary to make the stock price more accessible, targeting a range closer to $100 per share.

By 2015, Netflix had evolved significantly, boasting 65 million members worldwide, with 42 million domestic and 23 million international subscribers. In the second quarter of 2015 alone, Netflix added 3.28 million subscribers, more than double its total subscriber count in 2004. While net income for the quarter was $26 million, previous quarters had seen figures as high as $83 million. Hastings noted that reducing the share price would make it easier for investors to buy shares, increasing access to the stock.

Overall, Netflix's stock splits in 2004 and 2015 were driven by periods of substantial growth and were strategic decisions to keep its stock price within an attractive range for investors.

What Are Netflix’s Trading Hours?

Netflix stock can generally be traded from Monday to Friday, 9:30 AM to 4:00 PM Eastern Time (1:30 PM to 8:00 PM GMT).

In addition, some brokers and exchanges, like the Nasdaq (US-TECH 100) stock exchange, offer extended trading hours. This includes pre-market trading from 4:00 AM to 9:30 AM ET (8:00 AM to 1:30 PM GMT) and after-hours trading from 4:00 PM to 8:00 PM ET (8:00 PM to midnight GMT). However, the trading hours on the Plus500 platform may differ.

What Factors Can Impact Netflix Share CFD Prices?

Several different factors and types of events have been known to affect Netflix's share price. Here are some main factors that traders should watch out for:

• Subscription Numbers: The growth of Netflix's subscriber base is a primary focus for the company and a crucial metric for investors. Changes in customer acquisition patterns can significantly impact the share price. Rapid subscriber growth indicates strong demand and market penetration, which can boost investor confidence and drive the share price upward. Conversely, stagnation or decline in subscriber numbers can raise concerns about the company's growth prospects and lead to a drop in the share price.
• Content Success: The performance of Netflix's original content is another vital factor. Popular shows and movies can attract new subscribers and retain existing ones, driving revenue growth and positively influencing the share price. Successful content not only boosts subscriber numbers but also enhances brand value and market position. On the other hand, less popular releases can lead to concerns about Netflix's content strategy and capital allocation, potentially causing the share price to fall.
• Business Metrics: Quarterly earnings reports are pivotal for Netflix's share price. These reports provide insights into subscriber growth, revenue, and profit margins, which are critical indicators of the company's health. When results deviate from analyst expectations, whether positively or negatively, the share price often experiences significant fluctuations. For instance, surpassing subscriber growth forecasts can lead to a surge in stock price, while missing revenue targets might cause a decline.
• Market Competition: Netflix operates in a highly competitive environment with rival streaming services like Walt Disney’s (DIS) Disney+, Amazon’s (AMZN) Amazon Prime, and HBO Max. These competitors have substantial resources to invest in new services, exclusive content deals, and technological innovations. Any advancements by competitors that threaten Netflix's market share can negatively affect its share price. For instance, a new, highly anticipated release from a competitor could lure subscribers away from Netflix, impacting its revenue and share price.
• Economic Conditions: Broader macroeconomic events also significantly influence Netflix's share price. Factors such as interest rate hikes, economic downturns, and high inflation can reduce potential subscribers' disposable income, making them less likely to subscribe to streaming services. Economic uncertainty can make Netflix shares less appealing to investors, potentially leading to a decrease in share price.

It's important to remember that trading Netflix share CFDs is materially different from buying and selling traditional Netflix shares. CFDs allow traders to speculate on the price movement of Netflix shares without owning the underlying asset. This means that while traders can potentially capture price changes, they do not have the same rights as shareholders, such as voting rights or dividends. As with any investment, it's crucial to understand the differences and risks involved before trading.

Netflix Predictions

Although it may at times be difficult to comprehend fully, several companies across different sectors, as of July 2024, boast market capitalisations exceeding $1 trillion. Additional firms could also be set to join this elite group over the next decade. According to some analysts, Netflix could be one of them by 2035.

Market capitalisation measures a company's value by multiplying its stock price by the number of outstanding shares. As of 2024, six American companies have surpassed the $1 trillion market cap mark: Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Alphabet (GOOG), Amazon, and Meta Platforms (META). With a market cap of approximately $280 billion, Netflix is among the 25 American companies with market caps between $200 billion and $1 trillion.

Achieving a new all-time high differs from reaching a $1 trillion market cap. Netflix would need to quadruple its July 2024 market cap over the next decade to join the $1 trillion club. If Netflix were to grow at a compound annual growth rate (CAGR) of 13% over the decade preceding 2035, it could get there. This growth rate is slightly higher than the 12.7% CAGR achieved from 2019-2024.

Whether Netflix reaches a $1 trillion valuation or not, the critical question for investors may be how the stock stands at the moment when they are making trading decisions. As of June 2024, Netflix was performing well. The company’s revenue had grown by about 15%, and earnings had increased by 79% year over year. Free cash flow per share—a crucial financial measure—had grown tenfold over the last five years. However, there are concerns about the stock's valuation. Netflix's price-to-earnings multiple was 45x over the same period, significantly higher than the S&P 500 average.

For CFD traders looking to diversify their portfolio, Netflix is worth considering. The company's robust financial performance and growth potential make it a compelling investment, even if the path to a $1 trillion market cap is still being determined and challenging. It's also important to remember that trading Netflix shares as CFDs is not the same as owning traditional Netflix shares. CFDs allow traders to speculate on price movements without owning the underlying asset, which means they don't have shareholder rights such as voting or dividends. Understanding these differences and the associated risks is crucial before trading.

Conclusion

To sum it all up, Netflix’s share price trajectory has been defined by its journey from DVD rental service to a global entertainment giant. Through strategic investments in original content, a commitment to corporate values, and expansion into new entertainment forms, Netflix continues to shape the entertainment industry, setting standards for the future of media consumption. Whether this industry-defining momentum can be maintained into the future or not, exposure to Netflix shares’ price movements can be accessed via the Plus500 platform.

FAQs:

Where are Netflix shares listed?

Netflix shares are listed on the NASDAQ stock exchange under the ticker symbol NFLX.

What was Netflix’s IPO date and price?

Netflix went public on May 23, 2002, with an initial public offering price of $15 per share.

Does Netflix distribute dividends?

As of 2024, Netflix does not distribute dividends to its shareholders.

How can I trade Netflix shares?

Netflix shares can be traded through stock exchanges, while CFDs with Netflix shares as the underlying instrument can be traded on platforms such as Plus500.

Who are Netflix's top shareholders?

Netflix's top shareholders include institutional investors such as Vanguard Group, BlackRock (BLK), and Capital Research Global Investors, among others.

Who are Netflix's main competitors?

Netflix's main competitors include streaming services such as Disney+, Amazon Prime Video, and HBO Max.