In November 2021, after more than a year of COVID-19 lockdowns, Netflix's (NFLX -1.51%) shares were trading at almost $690 apiece. Now, following months of high inflation and widely held concerns about a potential recession, the company's stock is trading around $340, a drop of approximately 50%. However, the Netflix of late 2021 is in some ways quite different from the Netflix of today, and there may be some good reasons to buy the stock right now. Let's explore.

Games

Netflix got into the gaming space in late 2021, rolling out a collection of iOS and Android titles exclusively available to its subscribers. Initial reports indicate customer response was muted, with reportedly less than 1% of its subscriber base downloading its games. Nonetheless, Netflix has made it clear it sees video games as a key element of its long-term growth.

"[W]e believe that the future of television, of films, and games is streaming," Netflix co-CEO Ted Sarandos told investors last year. And as if to underline that point, the company recently announced it's exploring a cloud gaming service that would allow players to enjoy its games via any device that currently supports Netflix content.

Those that have been watching the cloud gaming space for any length of time might be skeptical about Netflix's ambitions. After all, there have been several high-profile attempts at mainstreaming triple-A games that don't rely on personal computer or console hardware, many of which are yet to gain notable traction, or have been shut down entirely.

Nonetheless, research firm IMARC says the global cloud gaming industry was worth just over $1 billion in 2022, and it predicts it could reach $13.5 billion by 2028.

Ads

The ad-supported video-on-demand (AVOD) space has grown exponentially over the last few years. According to Kantar, AVOD operators collectively added 2.6 million subscribers over the first three months of 2023, while premium subscription video-on-demand (SVOD) services lost 2.2 million customers. Of course, Netflix has a foot in both camps since it added its entry-level Basic with Ads tier in late 2022. And while some Netflix stakeholders may have concerns about the AVOD tier cannibalizing higher-cost SVOD tiers, the company has said it has only witnessed "limited switching behavior."

Netflix CFO Spencer Neumann also explained during the company's fiscal 2023 second-quarter earnings interview that the "per-member ad plan economics" of Basic with Ads outperforms both its ad-free Basic plan and its Standard plan in the U.S.

More recently, the streamer disclosed Basic with Ads has accrued almost 5 million sign-ups, adding that more than a quarter of new subscribers are choosing the AVOD tier in markets where it is available.

Subscribers

One of the biggest stories for Netflix last year was that it lost subscribers for the first time in more than a decade. However, the company bounced back, and in Q2 2023 Netflix reported 232.5 million global customers -- a 5% increase year over year.

In contrast, Walt Disney's flagship Disney+ service shed subscribers over its two most recent quarters, pulling its subscriber base to just under 158 million -- down from a previous high of almost 165 million.

One wrinkle to all of this is that Netflix has just announced that U.S. customers who share their account passwords with other households will soon have to pay $7.99 a month for the privilege. While it's too early to speculate how the change will impact Netflix's subscriber numbers over the long-term, a 2022 report showed 13% of respondents said they would cancel their accounts if asked to pay as little as $3 a month extra for letting friends and family piggyback off their subscriptions.

The long view

While it remains to be seen if Netflix's stock will ever change hands around the $700 mark again, the streamer is certainly signaling to shareholders that it is focused on growth. And while some may doubt the wisdom of the Netflix's move into games, while others question if the company can ever derive enough money from ad sales, the company is at least playing in both arenas -- while also adding subscribers.

Investors watching Netflix's stock should pay attention to its next quarterly earnings report, which is expected in July 2023. Should the streamer continue to outpace its competition with sign-ups, while continuing its moves into new areas, then Wall Street's appetite for the company's stock may well increase.