From 2009 to 2020, the Netflix (NASDAQ:NFLX) share price returned over 11,000% to investors. A £1,000 investment a decade ago would give you more than £111,000 today.
Despite these incredible gains I think the Netflix share price can — and will — go much higher. In this article I’ll tell you exactly why I’m buying it as a long-term hold for my portfolio.
Netflix is the Google of TV
Netflix is a cultural phenomenon. It’s one of those global brands that has become inextricably linked with the thing it produces.
Tell a friend or a colleague about a new show you like today. What will be their first question? Most likely: “Is it on Netflix?”
Global lockdowns have helped further cement it in the public consciousness. And this has been borne out in the numbers.
A chart of the Netflix share price looks like a pleasing exponential curve. And now is a great time to buy, in my opinion. The stock has dipped around $50 per share from its all-time July 2020 high — while remaining in an uptrend.
ETF, fund or direct?
If you want exposure to the Netflix share price in your Stocks and Shares ISA or SIPP, you could choose to buy shares direct, or you could choose to hold them as part of an ETF or fund.
Just bear in mind that while UK funds will hold Netflix, they will also hold a diversified mix of lots of other stocks and shares. So if you only want Netflix and not Facebook, for example, then you might be better buying the shares directly in your ISA.
If you haven’t already done so, you’ll need to fill in a W8-BEN form to hold US shares in your UK portfolio. The forms are usually easily available through your ISA provider’s website and take around no more than 10 minutes to complete.
Like Amazon, Netflix doesn’t pay a dividend, but this isn’t a deal-breaker for me. I’m happy for the company to use all the spare cash it has to keep improving its subscriber base.
Like Amazon, I’m confident the company will continue to grow its earnings every year and command a higher share price in future.
Will the Netflix share price keep growing?
All those £5.99 and £11.99 monthly packages add up to produce some pretty stonking revenue reports.
But as a first mover and market leader Netflix now has some pretty stiff domestic competition in the race for monthly subscribers. Disney+, HBO Max and Hulu are catching up.
However, Netflix now has a foothold in 190 international markets, and is growing fastest in India and across the Asia Pacific region.
While US subscribers are only increasing 4% per quarter, that number is nearly 15% per quarter in Eastern markets. And these regions are producing an ever greater proportion of annual revenue.
By the end of 2019, Netflix pulled in over $20bn in revenue from 167m subscribers. Then the pandemic happened. By July 2020, it had amassed an extra 25 million viewers to take it to 192.5m subscribers.
And these customers stay with the streaming giant far longer than with the competition. Studies show the firm maintains just a 9% ‘churn rate’ of customers cancelling their subscriptions and turning to rival streamers.
Becoming the number one player in overseas markets will keep the Netflix share price growing for years to come, I feel.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
TomRodgers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Netflix. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.