Netflix, Inc. (NFLX) saw steady growth in 2020 and early 2021, after a brief dip around March 2020. The stock has outpaced the S&P 500, increasing by about 57.4% compared to the S&P 500’s gain of approximately 18.4% over the past year. However, despite healthy growth, the entertainment service company slid on the WhaleWisdom Heatmap to a ranking of 23 from 12.
Netflix has an online entertainment business that provides subscription services, streaming movies and television shows, and DVDs by mail. Netflix benefitted considerably from coronavirus pandemic related shutdowns in television and movie production, in addition to stay-at-home government orders that had customers around the world looking for alternative in-home entertainment. The pandemic helped to expand its customer base and increase viewer engagement as binge-watching became an excellent distraction for many. While growth leveled off in recent months as pandemic restrictions lifted, Netflix established new fans.
Hedge Funds Are Selling
Looking at third quarter activity by the top hedge funds, Netflix saw a decrease in its aggregate share value. Aggregate 13F shares held fell to about 60.1 million from 63.0 million, a decrease of approximately 4.6%. Of the hedge funds, 39 created new positions, 117 added to existing holdings, 32 exited, and 136 reduced their stakes. Institutions were also selling and decreased their aggregate holdings by about 1.1%, to approximately 352.0 million from 355.9 million.
Analysts Are Optimistic
Analysts are optimistic about the stock, raising price targets, and acknowledging opportunities. Royal Bank of Canada (RBC) maintained an outperform rating on the stock. It gave Netflix a price target of $630, noting that Netflix’s stock price does not reflect its future growth and profitability potential. Cowen and Co.’s analyst, John Blackledge, raised its price target on Netflix to $650 from $625, due to optimism about the fiscal fourth quarter. Blackledge expects to see substantial subscriber numbers, especially with seasonal pandemic related shutdowns bolstering viewership.
Positive Multi-Year Estimates
Analysts anticipate continued revenue growth through 2022, with a predicted annual rise in a range of approximately 16.7% to 23.8% between 2020 and 2022. This would bring revenue estimates to roughly $24.9 billion in December 2020, later increasing to $34.5 billion by 2022. These encouraging year-over-year forecasts would also ultimately bring earnings up to $12.49 per share in 2022, up from an estimated $6.30 for 2020.
Amidst pandemic lockdowns and social distancing, binge-watching viewers resulted in significant growth for Netflix in 2020. Analysts are bullish on the stock and have raised price targets. While growth may be slower as of January 2021, Netflix is positioned for long-term success. As Netflix maintains its subscriber base and attracts additional subscribers with new series content, investors have an excellent long-term opportunity.