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Why Smart Traders are Buying Netflix Stock

October 12, 2021
Why Smart Traders are Buying Netflix Stock

Netflix is an attractive stock to own because it’s one of the best streaming services worldwide. Over the years, the company’s stock price has enjoyed significant increases. According to CNBC, Netflix has a market cap value of $243.4 billion. Although the company’s future growth seems lower than what investors experienced in the past, the current share price of approximately $631.85 does make a potentially attractive target.

Netflix Overview

Netflix is an American streaming media giant that trades on the NASDAQ.

  • Netflix trades on the NASDAQ under the NFLX stock symbol
  • In the stock market, traders transact  Netflix shares in USD
  • As of October 7, 2021, Netflix share price is $631.85

Top 3 Reasons Why Smart Traders Target Netflix Stock

Listed below are the top reasons why smart traders target shares of this streaming giant.

  1. Netflix is Experimental
    When it comes to the streaming industry, no company is as experimental as Netflix as it learns through data. They use data science to enhance customers’ streaming experience, which offers them great video qualities and limited buffering interference. Netflix’s main objective is to keep their over 200 million streaming subscribers glued to their original programs as much as possible.
    The company depends on a skilled team of advisors from various academic fields, such as radiotherapy, economics, applied mathematics, neuroscience, biostatistics, and political science, to keep consumers happy and assure continuous innovation. This is one of the reasons why Netflix is a streaming leader amongst other tech companies in this business.
    Netflix transformed from mailing feature films in DVDs to streaming, and they now plan to incorporate video games to further grow their subscriber base. This innovative thinking keeps the company ahead of its competitors.
  2. Netflix is a Giant in a Growing Market

    “Netflix will enjoy a continued annual growth of around 10% over the next couple of years”, says Mark Mahaney, RBC Capital analyst. According to Mark, Netflix can reach roughly 500 million active subscribers by 2030.

    Remember that streaming is still in its infancy. Movie theatres still lag when it comes to advancing to an all-streaming service. With the advancement in technology, however, Netflix can increase their revenue growth by investing in the specific content type that no company is considering at the moment. For instance, it could start streaming live sports in the future.

  3. Increased Content Budget and Revenue
    Unlike its competitors, Netflix’s investment strategy is different because they invest a lot to attract new subscribers. Even with a reduced production schedule in 2020 due to the Coronavirus pandemic, Netflix still spent $12.5 billion to develop original content, spread across movies, documentaries, and other video content.
    As the company continues to increase its subscribers annually, its yearly budget should continue to grow As a result, it looks like Netflix will be able to reach its content ambitions. While its operating margin increased to 18% in 2020 from 7% in 2017, the management projects a 20% operating margin for 2021, considering the prevailing foreign exchange rates.

How to Trade CFDs On Netflix Shares

Netflix is a high-value international share that has seen a considerable increase in value since it went public. Here are some of the facts that could point to Netflix as an attractive option for traders:

  • Regulation and Taxation Changes
    After getting a substantial market share in the US, Netflix is looking to repeat that success on the international stage.  However, this objective makes it susceptible to several statutory and tax changes affecting its stock’s price performance. Regarding its international growth, Netflix puts emphasises content localisation, which does however mean they will have to comply with government restrictions in specific jurisdictions.
  • New Markets Entrance
    With expansion into new markets, new opportunities arise. Traders need to track the company’s expansion growth if they want to invest effectively.
  • Competitor Performance
    After being an alone player in the movie streaming industry for many years, Netflix now attracts a lot of competition. HBO, Amazon, and Hulu, for instance, are more than able to rival Netflix. Anyone looking to add Netflix to their portfolio should keep an eye on the competition as well.
  • Quarterly Earnings Report
    Netflix’s financial year runs from January to December. Nonetheless, they release quarterly earnings reports to update investors about the business’s financial position. The company’s business is driven by growth in their subscriber base so that number should have an effect on their bottom line.

How to Buy Netflix Stocks and Trade CFDs

Traders have two options when investing in Netflix stock; buy traditional Netflix stocks from an online broker or trade CFDs (contracts for difference).

Netflix Traditional Stock Trading vs CFD Trading

CFD trading is similar to stock trading except that the company retains the stock’s ownership when exchanging CFDs. Simply put, when traders buy Netflix stocks through a broker, they own a share of the company. On the other hand, when trading CFDs, traders have an agreement with CFD brokers and speculate that Netflix’s price will rise or fall.

Should One Trade Netflix CFDs or Netflix Shares?

Pros and cons for trading both Netflix CFDs and stocks exist. The best to trade depends on a few factors, individual circumstances, and personal preference. Trading in Netflix shares and stocks might be better suited to long-term investors, especially those that prefer a 10-year investment period.
Netflix CFD trades would be more suitable for short-term and intraday traders. During intraday trading, investors hope to profit from Netflix’s price movement throughout the day. It’s recommended to know what to expect before any trading because the two have different pros and cons.
For CFD trades, one can hedge a trade against another one due to the ability to long or short a Netflix stock. A hedge is similar to capital at risk as it secures the investment money.

Where to trade Netflix CFDs?

Tixee would be a good choice for anyone looking to add Netflix CFDs to their trades. The broker offers a range of platforms for desktop and mobile devices as well as a browser based Webtrader, With an attractive range of tradable assets and a transparent trading environment, Tixee is an attractive option for traders of all experience levels.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.

Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.

Categories: Stocks

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