Oh yes, I remember it like it was just yesterday. Netflix (NFLX) was sitting at a dismal $22 after peaking out around $40, I recommended the stock, and a year and half later the dvd rental company now sits at $70.
That’s a 220% return for those math illiterate. The scary part is that the stock continues to rise and analysts are continuing to upgrade the ratings and price targets.
Throughout this 18 month period I have seen argument after argument trying to diminish the strength of this company; such as Redbox threatening the market share or other streaming services (i.e. Apple, cable on-demand) hurting Netflix.
Netflix offers services that similar competitors lack. It offers BOTH physical and streaming options.
- Unlike Redbox, you are not required to make a trip to your local depository to drop off the movie.
- Unlike Apple, there are no restrictions on how long you can rent a movie.
- Unlike your cable’s on-demand, you aren’t required to pay $5 for the latest releases.
Certainly individuals will see benefits of the other options over Netflix, but, when looking for quality stocks, you want something that attracts to the majority over minority. While streaming movies online has become popular, majority of the households do not have the adequate technology to enjoy this feature or they just might not want to.
All this being said, there is still one MAJOR flaw that I believe is preventing Netflix from launching into a $100+ stock.
While Netflix does offer streaming options, only 25% of its users are actually taking advantage of this resources; however, (as a Netflix subscriber myself) the movies available to watch via streaming is.. well.. quite pathetic.
Majority of the movies (both old and new) that people actually want to stream instantly are not available. Whose responsibility this falls on, I have no idea, but Netflix needs to get working with major studios to draw some agreement to license out some more titles.
Bottom line, while Netflix can continue to rise, it can only move up so much based on its current status. It won’t be reporting record in new subscriptions every quarter and it pretty much already rules the dvd rental space; however, IF it can beef up its streaming service, then watch out.