Netflix's (NFLX 2.33%) persistent lead in the global streaming TV industry has created many millionaires among its long-term shareholders. Since 2007 when the company started pivoting away from the DVD-by-mail business, the stock price has soared more than 16,000%, compared to a 180% gain in the wider market.
It's a much bigger business today, but Netflix still has a long runway for growth ahead as it expands into international markets and deepens its content offering. So let's look at a few of the ways the streaming video leader might continue posting outsized returns for investors from here.
Not nearly done growing
Netflix's 2020 was epic, with 37 million new users signing up for its service. That achievement blew past the prior annual growth record and pushed the global subscriber figure above 200 million. But it would be a mistake to assume the company's best days are in the past.
Consider that Netflix only accounts for a small fraction of TV viewing time in the U.S., its most mature market. That figure has room to spike over the next few years thanks to improvements in the content catalog and the global shift toward on-demand, at-home entertainment. As the leader in this space, Netflix stands to win a disproportionate share of this growth.
There's room for much higher monthly fees over time, too. Most users today pay $13.99 per month for unlimited access to the service, compared to $11.99 per month two years ago. Netflix routinely boosts that cost as it steps up the value of its content. And that value is getting a big shot in the arm in 2021, courtesy of dozens of exclusive movie releases set to hit its servers. Walt Disney is charging many of its Disney+ streaming customers a $30 added fee to access select new film releases on its service, which suggests Netflix can easily raise prices as it adds more competing live-action and animated film releases.
The cash and revenue assets
If you passed on investing in Netflix back in 2010, you missed out on the business' transition from scrappy disruptor to entrenched industry giant. That was a wealth-generating trip for shareholders -- but its current position is arguably more attractive from an investment point of view.
Netflix reached positive cash flow for the first time last year, and while that figure was inflated by the pandemic, the company should generate a growing annual cash haul from here on out. That means no more annual visits to the debt market, and likely surging direct cash returns from stock buybacks and dividends in the future. The company's profit margins have been steadily jumping each year, too, and are projected to rise by about 3 full percentage points each year.
It also gives CEO Reed Hastings and his team resources they can devote toward maintaining and extending Netflix's industry lead. The biggest bang for that buck will be content, but there are other attractive areas like tech development and marketing that should keep Netflix ahead of its peers.
Not a value stock
Netflix is sitting at a market capitalization of over $240 billion today, which means investors shouldn't expect another 16,000% gain over the next dozen years. But it is still primed for many years of market-thumping returns from here. And its financial strength removes a lot of the risk that led to the stock experiencing several plunges during its epic rise in the 2010s. That means shareholders should have a more peaceful growth ride, even it takes a bit longer to accumulate life-changing returns from owning Netflix stock.