Netflix (NFLX) stock is notoriously volatile. And while some nimble traders have surely used NFLX's gut-wrenching swings to their advantage over the years, plenty of punters with less fortunate timing have just as assuredly had their faces ripped off.
Netflix's truly long-time shareholders are in another class entirely. Those who bought stock in the streaming media giant two decades ago – and then held and held and held through NFLX's many vertiginous ups and downs – have enjoyed outstanding returns vs the broader market.
As successful as Netflix has been – and may continue to be – it remains at its core a fundamentally insecure business model. (Just look at NFLX stock's volatility for proof.)
On the plus side, Netflix is the king of on-demand streaming entertainment, serving TV series, films and games via 270 million paid memberships in more than 30 languages and 190 countries. It furthermore lays claim to arguably the best brand in the industry.
On the downside, Wall Street puts relentless pressure on the company to grow its subscriber base. As a consequence, Netflix must spend tens of billions of dollars on content to attract and retain viewers. Competition from the likes of Walt Disney (DIS), Apple (AAPL), Paramount (PARA), Amazon.com (AMZN) and others have forced Netflix to splurge on efforts to acquire, license and produce content over the past several years.
After peaking at $17.7 billion in 2021 – a whopping 50% increase vs the previous year – Netflix managed to cut spending on content. The company spent about $13 billion on content in 2023, and plans to cough up roughly $17 billion for programming in 2024.
Investors are very much counting on the company to keep a lid on that cash burn going forward. But it's going to be hard.
After all, nothing hurts NFLX stock like losing subscribers. Recall that in April 2022, shares plunged after Netflix reported its first loss of subscribers in more than a decade. The company shed in excess of $50 billion in market value overnight.
It's also worth recalling that Netflix stock was already in a steep decline at that point. Sluggish subscriber growth and rising costs had long knocked it off its perch. Indeed, shares hit an all-time closing high of $691.69 back in November 2021.
It's been a long climb out of that hole, but NFLX stock is back to trading near record levels.
The bottom line on Netflix stock?
Which brings us to what you would have today if you had invested $1,000 in Netflix stock 20 years ago.
The good news is NFLX stock has clobbered the broader market over the long term, generating an annualized total return of 36% over the past two decades vs 10.8% for the S&P 500.
To see what that looks like on a brokerage statement, check out the above chart and you'll see that if you invested $1,000 in NFLX stock 20 years ago, today it would be worth approximately $467,000.
By comparison, $1,000 invested in the S&P 500 over the same time frame would theoretically be worth about $7,800 today. (The broader market's return includes dividends, which Netflix doesn't pay.)
As for where Netflix stocks goes over the next 12 to 18 months, the Street's consensus recommendation on this communication services stock comes to Buy, but with somewhat mixed conviction.
Of the 48 analysts issuing opinions on NFLX stock surveyed by S&P Global Market Intelligence, 23 rate it at Strong Buy, eight say Buy and 14 call it a Hold. At the same time, two analysts rate it at Sell and one says it's a Strong Sell.
