Investing $1,000 in Netflix stock two decades ago would yield a significant sum today.
In a remarkable display of growth, Netflix, the leading provider of on-demand streaming entertainment, has significantly outperformed the S&P 500 over the past 20 years. This is evident as an investment in Netflix stock 20 years ago would be worth approximately $389,000 today, compared to $7,500 for the same investment in the S&P 500.
Netflix's growth far exceeds the broad market, making it one of the highest returning stocks over this period. The S&P 500's annual return of around 10.6% includes dividends, whereas Netflix has not paid dividends. More recently, Netflix has continued to outperform, with gains exceeding 850% since 2017 compared to 185% for the S&P 500 over that shorter window.
This exceptional performance reflects Netflix's transformation from a DVD rental service into a global streaming giant, fueling investor returns well above those of the overall market. The company has faced stiff competition from companies like Disney, Apple, Paramount, and Amazon, which has forced it to invest heavily in content acquisition, licensing, and production.
However, these investments are expected to leverage into significant subscriber growth, as Wall Street puts pressure on Netflix to grow its subscriber base. In 2021, Netflix spent $17.7 billion on content, a 50% increase from the previous year, to attract and retain viewers. Despite this, Netflix still boasts the best brand in the streaming industry.
Looking ahead, Netflix plans to spend $16 billion on programming in 2024 and $18 billion in 2025. Despite some volatility and a major decline in 2022, Netflix’s long-term growth has been exceptional.
The S&P 500, as a diversified index, provides steady long-term growth averaging about 10% annually, reflecting a broad basket of U.S. large-cap stocks. However, it carries different risk and volatility characteristics typical of a single high-growth tech stock compared to a diversified index.
As of a survey by S&P Global Market Intelligence, 46 analysts have a bullish consensus recommendation on Netflix stock, with 22 rating it as Strong Buy, 6 as Buy, 16 as Hold, and 2 as Sell. Despite a temporary setback in April 2022, when Netflix reported its first loss of subscribers in more than a decade, causing a $50 billion drop in market value overnight, the Street's conviction remains solidly bullish on Netflix.
In summary, while Netflix faces challenges from competitors, its exceptional performance in the past 20 years underscores its ability to generate impressive returns for investors. However, as with any investment, it's important to consider the risks and volatility associated with a single high-growth tech stock like Netflix.
Technology has been instrumental in Netflix's transformation from a DVD rental service to a global streaming giant, facilitating its high returns for investors. In light of this, the consensus among analysts, as per S&P Global Market Intelligence, leans towards a bullish view on Netflix's trading potential, with 46 analysts recommending a Buy or Strong Buy on the stock.
