As most investors are probably already aware, Netflix Inc. (NASDAQ:NFLX), the leading content streaming platform globally, came under pressure last year with the company losing millions of subscribers in the first half of 2022.
Things took a turn for the better in the second half of 2022 with Netflix adding just over 2 million subscribers in the third quarter, followed by more than 7.6 million subscribers in the fourth quarter. The company, in a bid to revive subscriber growth, unveiled a new ad-supported content tier last November, a decision that was widely praised by both analysts and investors. Although Netflix is facing short-term challenges, I believe the company seems well-positioned to grow thanks to its strategic changes.
After surging to more than $360 earlier this year aided by the improving market sentiment toward growth stocks, Netflix stock has declined to around $305. I think this presents a potential value opportunity for those bullish on the stock.
NFLX Data by NASDAQ:AMZN) Prime Video with viewership shares of 3.3% and 3%, respectively. Netflix, as evident from these numbers, remains the top streaming platform in the country by far.
The rising middle-income society in emerging nations will be a boon for Netflix as its addressable target market will expand with a new generation of consumers in populous countries such as India, Brazil and Malaysia embracing digital solutions including content streaming. The internet penetration rate is trending higher in many developing nations already, and this trend is expected to gather momentum in the next five years, aided by infrastructure investments to support the rollout of 5G technology.
Takeaway
Netflix may not be growing fast anymore, but it trades at a forward price-earnings ratio of 26, which is cheaper than in the past. The company has a long runway for growth and is experimenting with a few different ways to more effectively monetize its massive user base. The companys renewed focus on profitability makes it an interesting stock for growth investors shopping for bargains in this volatile market.
This article first appeared on GuruFocus.
