Facts about Netflix stock that investor needs to know
Facts about Netflix stock that investor needs to know

Netflix (NFLX) closed the most recent trading day at $355.88, moving -1.73% from the previous trading session.

For investors, it's been quite a ride. Netflix stock has fallen 46% from its all-time high in November; yet, the shares are still up almost 2,200% over the past decade. Shareholders who aren't already should probably become more familiar with the company.

Investors might also notice recent changes to analyst estimates for Netflix.

Here are five facts that every Netflix investor needs to know about the streaming giant. Investors should now be equipped with important information that will help them understand Netflix a little bit better.

Financial profile

Historically, Netflix naysayers have questioned if the company would ever be able to start producing positive free cash flow (FCF). Well, the time has finally come. According to management, 2022 will be the first year that the business will start to generate positive FCF, again showing the benefits of reaching such a massive scale.

Looking ahead, Netflix will keep no more than $15 billion of debt on its balance sheet. Furthermore, after reinvesting in the business, management is prepared to use excess cash to repurchase shares. In 2021, $600 million worth of stock was repurchased, and there's authorization to buy back $5 billion. While still definitely in growth mode, Netflix's financial position is set to improve.

International growth opportunity

In 2021, 93% (16.9 million out of 18.2 million) of the new subscribers that joined Netflix came from outside the UCAN region. Because of the domestic streaming market's maturity today, the majority of new members will continue to come from international markets.

Although the company's service isn't available in China, Asia is a huge opportunity for Netflix. India, which is projected to have 900 million internet users by 2025, is where Netflix is planning to invest hundreds of millions of dollars to introduce fresh content. The business recently announced price cuts in the country to better compete with the dominance of Amazon Prime Video and Walt Disney Hotstar.

Continuing to create local-language content will help Netflix drive viewership in overseas markets.

Digging into valuation, Netflix currently has a Forward P/E ratio of 33.24. Its industry sports an average Forward P/E of 8.09, so we one might conclude that Netflix is trading at a premium comparatively.

Meanwhile, NFLX's PEG ratio is currently 1.33. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Broadcast Radio and Television industry currently had an average PEG ratio of 1.33 as of yesterday's close.

Annual content budget

Speaking of content, Netflix spends a lot of money on it. Just last year, the company spent almost $18 billion on its shows and movies, up from about $12 billion in 2020. Even though this is already a large amount, the management team wants the content budget to double or even triple over the long term as Netflix's customer count continues rising.

With so much capital to invest year in and year out in creating compelling content for its viewers, it's no wonder that Netflix has become a force to be reckoned with in Hollywood.

Top shows and movies

In 2021, Netflix received the most Emmy awards and nominations as well as the most Oscar awards and nominations out of any studio. As I've touched on, having the first-mover advantage has afforded the company the ability to not only develop a core competency in knowing what shows and movies will do well, but also the deep pockets to invest in content with top producers and acting talent.

Squid Game, released in Sept. last year, is Netflix's most successful series ever, with 1.65 billion hours viewed in the first 28 days. Netflix's broad reach gives it the ability to bring low-budget productions to the world stage, which will only result in more producers wanting to work with the company.

And when it comes to movies, the business is attracting some big names. Red Notice and Don't Look Up, both released in the fourth quarter, are Netflix's two most popular movies of all time. The streaming wars have certainly heated up, but Netflix has proven itself as one of the top viewing options for consumers.

Total subscribers

It probably won't surprise any readers that Netflix, with its 222 million members (as of Dec. 31), is the clear leader in the streaming space. Co-founder and co-CEO Reed Hastings was convinced more than a decade ago that the internet was going to fundamentally change how people consumed video entertainment, and he positioned his company to take advantage of this trend.

Today, roughly 66% of subscribers are located outside the U.S. and Canada (UCAN), showcasing a truly global enterprise. Many investors believe that Netflix's UCAN penetration has plateaued. This leaves the rest of the world as the major growth driver in the years ahead.

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