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Is Netflix Still a Buy After Soaring 50% This Year?

By Neil Patel – Aug 7, 2020 at 4:26PM

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Bolstered by the COVID-19 pandemic, the world's leading streaming service may still have room to run.

The onset of the coronavirus pandemic and ensuing recession would usually devastate most companies. But not Netflix (NFLX 1.09%), whose business has flourished during a tumultuous time. The stock is up 50% so far this year, and like many other tech companies, shelter-in-place orders have been a boon as existing digital trends accelerate.

While the market has clearly shown, and potentially priced in, its optimism on the future prospects of Netflix, I still think there's upside for the stock.

The first two quarters of 2020 were quite impressive, as Netflix added nearly 26 million global subscribers during the six-month period. Although there's no doubt that some of these new members were pulled forward from later quarters, there could not have been a better environment to showcase just how significant Netflix's service is to its users.

remote pointing toward TV displaying a streaming service

Image source: Getty Images.

Due to the company's long production lead times, most of its 2020 lineup for launching original programming remains intact. Releases for 2021, however, will be weighted more toward the second half of the year as production slowly resumes.

During Netflix's second-quarter 2020 earnings call, CFO Spencer Neumann said, "Netflix 2021 is going to be a much better service than Netflix 2020," highlighting his confidence and excitement regarding the company's content strategy. He continued, "we think that the growth opportunity is as big as ever."

With a P/E ratio hovering over 83, the stock definitely does not look cheap. But investors would be wise to pay up for an industry-leading business that sells a proven, indispensable service.

Neil Patel has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.

Stocks Mentioned

Netflix Stock Quote
$320.41 (1.09%) $3.46

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