Netflix (NFLX +0.35%) deserves credit for spearheading the world's shift away from cable TV and toward streaming. It's the leader in that market, with a global presence, massive user base, pricing power, and sizable profits.
Should you invest $100 in this dominant streaming stock, which trades 29% below its peak (as of Dec. 12), right now?
Image source: Netflix.
Netflix is an expensive stock
This stock has performed exceptionally well in the past, soaring 701% over the trailing-10-year period. This is despite the fact that shares have dropped considerably from their all-time high. Netflix missed Wall Street estimates when it reported Q3 financials. And the market looks to be concerned about the company's proposed takeover of Warner Bros. Discovery.
Even after the dip, the stock is expensive. It trades at a price-to-earnings ratio of 40. This is the main reason investors shouldn't add Netflix to their portfolios right now.
NASDAQ: NFLX
Key Data Points
Keep the stock on your watch list for now
This doesn't mean investors should completely forget about Netflix. This is a high-quality company. It has a cost advantage, which helps it collect lots of net income and free cash flow while it also spends aggressively on content. And there is still meaningful growth potential, particularly in international markets.
It's best to watch the stock and wait for a better entry point.
