Is Netflix's Stock A Buy?

Is Netflix ($NFLX) still a buy? Is there considerable growth left in the price of the stock? Over the last few weeks, the stock has come up in a few conversations as a takeover target for companies seeking to compete and grow their online video and content services. For example, it was recently discovered that Apple ($AAPL) may have been interested in the company as Apple ($AAPL) is exploring the idea of launching its own video subscription service.

While this blog does not provide in-depth investment analysis and reports on stocks because there are already many superior sources readily available. What we do like to do is periodically review a stock to determine if a stock may still be a viable investment growth opportunity. Ever since legendary investor Carl Icahn sold over a billion dollars worth of the stock in June of 2015, the share prices have not been able to sustain any considerable support above $110 per share. This may not mean anything, except the fact that Icahn may have just decided to seek better opportunities elsewhere.

Has the stock been consolidating solid support before making a big move upward, or are there structural operational issues with how the company operates, new competition, or other unknown issues that may not be observable just by looking at how the stock has been trading over the last 12 months. What we do know is that in 2015 (Cash from Operations, Capital Spending and Free Cash Flow) -749, -91, -841 respectively, were all deeply negative, suggesting that the company ramped up spending and investments, restructured some major operations and made additional acquisitions to handle the next level of growth. Newly added subscriber subscriptions are still strongly growing. However, when Mr. Icahn sold all of his shares last year as of June 25, 2015, the stock was trading at $109.39. Almost one year later the stock closed on May 31, 2016 at $102.57.

 

Based on 12 month estimated growth rates, the company's earnings per share is still expected to grow by 126% or more. Morningstar has the stock fairly valued as of their last analysis at $64 per share. My advice would be to purchase shares on dips and try to avoid chasing the stock or purchasing the stock on new highs. Patience may be what is needed for this stock to handsomely pay off.

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