Netflix Stock Forecast: Long-Term Path After Corona Boost

This Netflix stock forecast article was written by Michael Shpits, a Financial Analyst at I Know First.

Summary:

  • Netflix stock saw growth of 18.18% over Q1 2020 with record subscriber growth of 15.77 million new global paid net subscribers.
  • Prolonged self-isolation in strong Netflix markets continues to boost stock and subscriber growth.
  • Stimulus checks in United States provide disposable capital for new potential subscribers.
  • Growth expected to wane after stay-at-home orders are lifted.
  • Steady one-year growth projected due to emboldened customer base and large portion of 2020 and 2021 programming already filmed.

Netflix stock has seen a strong increase of 18.18% over a three-month period, as predicted by the I Know First algorithm. This growth came as a result of the global COVID-19 Pandemic, and subsequent stay-at-home orders in most parts of the world.

Netflix stock forecast
(Source: Yahoo Finance)

With growing numbers of people self-isolating, the company has stated that their doubling of expectations for Q1 2020 subscriber count is a result of the current global crisis. Predicting to add 7 million subscribers in Q1 2020, the streaming service added 15.77 million new global subscribers.

As coronavirus spread starts to level off in countries such as Israel and Japan, countries like the United States see no immediate end to the spread of the virus. States at the center of the epidemic such as Massachusetts have extended their stay-at-home orders as a response to the current infection trends. These continued epicenters of COVID-19 will likely see growth in Netflix subscriber count, leveling off until the stay-at-home orders end.

Yet, since Netflix has captured the bulk of the U.S. streaming market, its growth potential comes from international subscribers. An example of a country with both short and long-term growth opportunity for Netflix is Russia, who is seeing increased numbers of new coronavirus cases each day and a steady increase in total population internet usage over the last two decades. As coronavirus continues to spread even in developing economies, self-isolation and increased trends of higher internet usage will bolster Netflix subscriber count in the immediate short-term and foreseeable long-term.

Despite having 85% of US streaming subscribers subscribed to them, Netflix has room to grow in the United States. Specifically, the recent CARES Act passed by Congress which grants each individual up to $1,200 in coronavirus-related economic assistance has given Americans more spendable income. A recent survey showed that people spent this mostly on necessities such as food and gas, yet surprisingly had 5% of people say they spent it on video games. It can be assumed that as essential purchases are done, any leftover spending will be recreational, leading to a runoff effect in renewing Netflix subscriptions or allowing new subscribers to sign up with newfound funds.

Previously mentioned record number of quarterly subscriber growth was only further emboldened by the company’s first quarter of positive cash flow since 2014. This increase came as a result of leaner operation, given lower production costs from a worldwide pause on film and television production.

Netflix’s subscribers expect consistent content, leading to issues if Netflix experiences immediate halts in their content production. However, Netflix has stated that production for most of its 2020 and some of its 2021 content has already finished, diminishing concerns of a slowdown in new content releases. This fact supports the idea that Netflix will remain stable in the coming year by avoiding severe shutdowns in its production.

Despite projections for continued growth in the short-term self-isolation, Netflix price will likely wane going forward for the next few months. The recent surge in subscribers is said by Netflix to come at a later cost of growth. The temporary boost given by increased home quarantining will go away as soon as stay-at-home orders are lifted, projected to be end of May at the earliest and late summer by more skeptical opinions in the United States. The strength of the U.S. dollar is also projected to hurt international revenue, a market Netflix has recently been experiencing large success in. However, with an increased subscriber base and steady content ready for 2020 and 2021, Netflix is likely to retain much of its success in recent months and end on a positive return by end of 2020.

Conclusion

NFLX has seen substantial growth in the first quarter of 2020, driven mainly by the stay-at-home isolation as a result of the coronavirus pandemic. This immediate boost in subscriber count and cash flow is expected to continue in the short-term until self-isolation wanes down across countries. As a result, I recommend a buy rating on NFLX for the next coming month as the stock reaps leftover benefits of coronavirus effects.

Going forward after one month, NFLX is projected to decrease as the recent surge in subscribers is countered by the expense of decreased growth. However, at-the-ready content releases for 2020 and continued growth in international markets is projected to keep NFLX on a steady and consistent growth to end of 2020. As a result, I recommend buying NFLX after the price dip expected a few months from now as a hold until end of year 2020. This recommendation comes with support from I Know First’s algorithm which gave a clear 1-year bullish signal for NFLX with a market trend score of 1291.07.

Netflix stock forecast

Past I Know First Forecast Success With Netflix

On April 2, 2020, the I Know First algorithm predicted a bullish movement for the 30-day Netflix stock price forecast. In this time frame from April 2, 2020 to May 1, 2020, Netflix grew by 14.06%, confirming the algorithm’s bullish forecast.

Netflix stock forecast
Netflix stock forecast

This bullish Netflix stock forecast was sent to the current I Know First subscribers on April 2, 2020.

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