Subscription streaming-video giant Netflix (NASDAQ:NFLX) has been a remarkably successful company since its founding, and its stock price has been a massive outperformer. The stock has risen approximately 333-fold since its initial public offering on May 23, 2002. That is a 38.8% average annualized return for almost 18 years, and good enough to have turned a $10,000 investment into over $3.3 million.

But the past is in the past. The more important question is: What's still to come for this stock?

Massive global opportunity

Netflix ended last year with 167 million paid subscribers, but that is only scratching the surface of its long-term global opportunity. There are an estimated 1.7 billion households in the world, excluding China where Netflix doesn't operate. Assuming a 0.9% annual population growth rate, that figure would be closer to 2.1 billion in 20 years. By then, the vast majority of those households should have fixed broadband or other high-speed internet connections. If the broadband penetration rate is an estimated 80% by then, there would be over 1.6 billion internet-connected households. That means Netflix's current 167 million subscribers is only about 10% of its long-term global opportunity.

Five of the characters from Netflix's Stranger Things

Image source: Netflix.

For Netflix to grow into that huge addressable market, it needs to continue to invest billions in new, compelling content globally, including locally produced content in all markets around the world. If it continues to do that successfully, Netflix will eventually be a relevant and attractive service for virtually every household globally that enjoys home video entertainment. 

Underappreciated competitive advantage

Big global opportunities are great, but a company needs a meaningful competitive advantage in order to capitalize on the opportunity. The root of the company's big advantage over its streaming competition is its scale. Netflix's 167 million global subscribers are paying it an annual run rate of about $22 billion per year. That allowed Netflix to invest almost $15 billion in content last year, with even more expected to be invested this year. No other streaming video competitor has anywhere near that kind of streaming revenue, which explains why none of them are spending anywhere near $15 billion on content exclusively for their streaming services.

For example, Amazon.com's Prime Video has the second-largest content budget and is thought to spend about $6 billion per year on content. Every other streaming service is spending less on content annually. For any of these services to dislodge Netflix as the go-to internet TV provider globally, it wouldn't need to just match Netflix's content budget, it would need to beat it substantially for many years. But none of them can justify doing so without Netflix's subscribers, subscriber revenue, and growth trajectory. It's a chicken-or-the-egg situation for Netflix's competitors, and the odds any of them can catch up with Netflix are slim and getting slimmer by the year.

OK, but why buy now?

Right now, investors still have a unique opportunity to buy Netflix while there are still fears that the streaming wars are heating up. Because of these fears, Netflix has vastly underperformed the market over the last year, generating a paltry 5.3% return compared to the 20% and 27.7% returns that the S&P 500 and Nasdaq indices generated over the same period, respectively.

A one year stock chart comparing the returns of Netflix, the S&P 500, and the Nasdaq Composite

Image source: YCharts

If Netflix continues to report robust global subscriber growth over the next few quarters, it will more fully prove to stock investors that it can continue to grow robustly in the face of greater competition. If that's the case, the negative and skeptical cloud surrounding the company should pass, the stock would likely perform very well, and this temporary opportunity to purchase at a bargain price will be gone for good. That's why Netflix is my top stock to buy in February.