It’s been a tough year for Netflix (NFLX -4.57%), to say the least. The company dropped 200,000 subscribers in the first quarter of 2022 and followed that performance by losing another million members in the second quarter. And stocks have taken a hit, down 66% from their all-time high last November. However, it’s not all bad news for Netflix.
Let’s take a look at an important data point that could convert the transmission detractors of the giant into supporters of the business and its actions.
Netflix is still the main streaming service
According to Nielsen Holdings, a market research firm, Netflix accounted for 8% of total US TV viewing time in the month of July, the most of any streaming service provider. This was not only higher than the 7.7% recorded in June, but also 0.7 percentage point higher Alphabetit’s YouTube. broadcast hours cable tv outdated for the first time too, an achievement that shows that the secular shift from traditional television to streaming entertainment is still going strong.
The fact that Netflix remains the leader when it comes to streaming hours should give confidence to shareholders who are betting on the company’s long-term prospects. Unsurprisingly, the loss of business subscribers this year has been a major catalyst in sending the stock down. But Netflix remains the preferred streaming option for consumers.
Last year, the company spent $17.5 billion in cash on content. And this year, the management team expects to spend roughly the same amount. That is an incredible war chest to continue to invest capital in attracting new members and retaining existing ones. We present successful series, such as Bridgerton Y Strange thingsas well as popular movies, such as red notice Y gray manon a consistent basis will help reduce churn and bring additional subscribers to the platform.
“We’re doing very well on the content side,” co-founder and co-CEO Reed Hastings said in the Second Quarter 2022 Earnings Call.
Following Netflix and YouTube, rounding out the list (in order) was Hulu, majority-owned by walt-disney, Amazon Prime Video, Disney+ and Discovery of Warner Bros.from HBOMax. Even though it’s becoming an increasingly crowded market, Netflix still shines.
Looking ahead, the return of the NFL and NCAA football seasons this fall should increase viewing time for cable TV providers. So when Nielsen releases the data for August, and especially September, don’t be surprised to see streaming share slip back to second place. Nonetheless, with major streaming players like Amazon, Apple and Alphabet making inroads into live sports, it’s probably only a matter of time before streaming cements its top spot on a regular basis.
“Everyone is coming,” Hastings said. “It’s definitely the end of linear television in the next five or 10 years.”
Netflix shares could be a buy
With shares falling 62% in 2022, Netflix stock is trading today at a price-earnings multiple of 21 and one sale price multiple of more than three. Both valuation metrics are significantly below their five-year averages. And Netflix’s 38% return over the past five years is less than half the S&P 500the total return during the same time.
Even longtime Netflix bears might consider buying the stock after looking at the data point discussed above and the current depressed valuation. The pessimism surrounding the business today could prove to be a great buying opportunity for investors who can ignore the noise and focus on the bigger picture.
And that bigger picture is that Netflix, with its 220.7 million subscribers today, still has a huge growth track ahead of it, especially in international markets. The US and Canada (UCAN) market appears to be saturated in terms of membership growth, combined with the loss of nearly 2 million customers in the first six months of this year. But in the Asia-Pacific (APAC) region, Netflix added almost 7 million subscribers in the last four quarters. And India, in particular, is a important growth market for the business
For those who still believe in the future of Netflix, now is the time to buy stock.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Neil Patel has positions in Alphabet (A shares) and Amazon. The Motley Fool holds positions and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Netflix and Walt Disney. The Motley Fool recommends Warner Bros. Discovery, Inc. and recommends the following options: $145 long calls in January 2024 at Walt Disney and $155 short calls in January 2024 at Walt Disney. The Motley Fool has a disclosure policy.