Netflix stock What $1,000 invested 20 years ago would be worth today

Netflix stock What $1,000 invested 20 years ago would be worth today

The Wild Ride of Netflix Stock: From Rags to Riches, and Back Again

Netflix

Netflix (NFLX) stock has gained notoriety for its enormous volatility. While some nimble traders have successfully navigated its gut-wrenching swings, many others have had their faces ripped off by its unpredictable nature. Nonetheless, the long-time shareholders of Netflix have thrived through the company’s ups and downs, enjoying outstanding returns compared to the broader market.

Investors who had the foresight to invest in Netflix’s stock two decades ago and held onto it despite the numerous vertiginous ups and downs have been handsomely rewarded. However, even these patient investors can empathize with those who have suffered losses in recent times, as they too have seen a significant chunk of their wealth evaporate on paper since late 2021.

The success of Netflix as the king of on-demand streaming entertainment cannot be denied. It boasts 231 million paid memberships in over 190 countries and has arguably the best brand in the industry. However, behind the scenes, Wall Street puts relentless pressure on the company to grow its subscriber base, which requires the expenditure of tens of billions of dollars on content acquisition and production. This high-stakes competition with industry giants such as Walt Disney, Apple, Paramount, and Amazon has forced Netflix to splurge on efforts to attract and retain viewers.

Remarkably, Netflix managed to cut spending on content by about 5% in 2022, from a record high of $17.7 billion the previous year to $16.8 billion. Investors are dearly hoping the company can continue to keep a lid on its cash burn. However, this won’t be an easy task for Netflix, as nothing hurts its stock price more than losing subscribers.

One notable example is when Netflix reported its first loss of subscribers in over a decade in April 2022, causing shares to plummet. Overnight, the company shed over $50 billion in market value. This decline was further exacerbated by sluggish subscriber growth and rising costs, which had already knocked Netflix stock off its perch. Having reached an all-time closing high of $691.69 in November 2021, Netflix stock currently trades approximately 37% below that level.

So, what if you had invested $1,000 in Netflix stock 20 years ago? Here’s the breakdown:

  • If you had sold at the November 2021 peak, your $1,000 investment would have grossed about $420,000.
  • If you hadn’t sold at the peak and held onto your investment, today you would be sitting on an impressive $265,750.
  • In comparison, $1,000 invested in the S&P 500 over the same period would theoretically be worth $6,856 today. However, it’s important to note that the broader market’s return includes dividends, which Netflix doesn’t pay.

Despite the recent downturn, Netflix stock has significantly outperformed the broader market over the long term. It has generated an annualized total return of 32.1% over the past 20 years, compared to the S&P 500’s 10.1% return. However, it’s worth highlighting that it will likely take a considerable amount of time for Netflix stock to regain its all-time high.

Currently, the Street’s consensus recommendation on Netflix stock is a Buy, albeit with somewhat mixed conviction. Among the 42 analysts tracked by S&P Global Market Intelligence, 20 rate it as a Strong Buy, one as Buy, and 18 as Hold. Two analysts rate it as Sell and one as Strong Sell. The average price target of $459.83 implies only about a 6% upside over the next 12 months.

While patient investors who have stuck by Netflix stock have been rewarded thus far, they may have to endure a longer waiting period to recover what they once had. Nevertheless, the wild ride of Netflix stock, from rags to riches and back again, continues to captivate the financial world.

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