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Netflix Stock: 3 Metrics To Watch In November

NLFX has been a winner in 2021, but is now a good time to buy the stock? We discuss a few key metrics that investors should watch in the month of November.

Netflix has recently released third quarter results that were well received – and Netflix stock  (NFLX) - Get Netflix, Inc. Report continued its YTD climb. Since the start of the year, NFLX has gained around 30% in market value. But is now a good time to buy the company's shares, after it appreciated more than 10% in just one month?

Today, we look at some of the main metrics that investors should pay attention to when thinking about buying NFLX in the month of November.

Figure 1: Netflix's headquarters in Los Gatos, California.

Figure 1: Netflix's headquarters in Los Gatos, California.

(Read more from MavenFlix: Disney Stock: Why Buy At The Start Of November)

Stretched valuations

As expected from a tech company with high growth prospects, Netflix does not carry the lowest valuation multiples in the market. Currently, NFLX commands a next-year P/E of 52 times and EV-to-EBITDA multiple of 20 times.

Does the above mean that the company’s stock is overly pricey? Perhaps, but a look at the peer group provides some perspective. Amazon stock’s  (AMZN) - Get Amazon.com, Inc. Report multiples are in line with Netflix’s, at a 50 times forward P/E and 30 times EBITDA multiple. The market seems to expect quite a bit of these two stocks.

On the other hand, certain names like Disney  (DIS) - Get Walt Disney Company Report and Apple  (AAPL) - Get Apple Inc. Report command more de-risked earnings multiples. Disney, obviously not a pure-play tech and streaming stock, currently trades at a 2022 P/E of 34 times. Apple’s 25 times is even more compelling. Apple's EV-to-EBITDA is also more conservative, at around 20 times vs. DIS’ 34 times that is more in line with AMZN’s.

(Read more from MavenFlix: Spotify Earnings: Why The Stock Spiked On Q3 Results)

Seasonality in November

Since its IPO, Netflix stock has delivered average positive returns in most months. However, November has been a rare exception. During the month that has just started, NFLX has historically dipped by an average of -1% – only to traditionally bounce back strongly some 30 to 60 days later.

In October, NFLX saw above-average gains of more than 10%, which may lead investors to think that now is the time to lock in some profits. But since the start of the year, the stock has already appreciated some 30% and does not seem to be slowing down much.

Figure 2: Average monthly return.

Figure 2: Average monthly return.

Disney's fiscal Q4 ahead

In the second week of November, another entertainment giant will release the results of its most recent quarter. Disney, which competes directly with Netflix in the streaming segment, is expected to report data on Disney+. Attentive investors will probably draw some conclusions on what these numbers might mean for Netflix and its stock.

According to Disney's own CEO, subscriber growth this quarter should be lower than what the market had been expecting. If this number disappoints analysts, some investors may choose to dump Disney and turn their attention to Netflix. As a reminder, the Los Gatos company has recently experienced a pickup in user grow that bodes well for the stock.

Twitter speaks

Which streaming and/or entertainment stock below would you rather buy now and hold through the end of November?

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(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)