Over the years, Netflix (NFLX) - Get Netflix, Inc. Report has returned some extraordinary gains to investors. If you had invested just $1,000 into its stock back in December 2016, you would be sitting on nearly $4,000 today.
And if you had invested way back in May 2002, when NFLX debuted on the stock exchange for $15 per share, that $1,000 would have turned into a cool $40,000 by now.
Netflix saw some of its most impressive gains this year. In October, its stock hit an all-time high just north of $700 per share.
But since November, the share price for the video-streaming stock has dropped.
We think that presents investors with an opportunity to buy Netflix at a reasonable price and with a greater margin of safety for long-term investors. Let’s dig into why.
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Is NFLX too expensive?
Simply put, with shares hovering around $700, Netflix was too expensive.
But its recent stock-price correction has changed that. As I write, Netflix shares have dropped by roughly 13% since mid-November and are currently closer to $600.
If you thought Netflix was overvalued at $700, this is a great chance to invest in the streaming company.
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Historical returns show an opportunity
Take a look at the following chart, which shows NFLX’s average monthly return.
Historically, November has been a “loser” month for Netflix. But the stock tends to head back into the black in December.
However, a look at historical average gains shows us that January is typically an amazing month for Netflix’s stock, with an average return of 17%.
If history is any guide – and it often is – grabbing shares of Netflix right now to take advantage of potential profit opportunities in the next couple of months might make sense.
So we’ve got two reasons to buy Netflix right now, in December:
- NFLX shares are cheaper than they were last month
- NFLX tends to see double-digit gains in January
We like Netflix. The company was a pioneer in the video streaming segment. And despite fierce competition from giants like Disney (DIS) - Get Walt Disney Company Report and Amazon (AMZN) - Get Amazon.com, Inc. Report, it still has the largest market share in the industry.
In addition, Netflix is constantly betting on new segments for revenue growth. For example, it recently pushed beyond films by launching an interactive games division. Moves like this expose Netflix to new subscribers and boost its bottom line.
We believe that the recent fall in NFLX’s stock price translates to a buying opportunity for long-term investors who agree there’s still plenty of growth to come.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting MavenFlix)