Netflix Stock: Should You Buy It In September?

Will Netflix stock continue to climb in September? Here is what history says about NFLX’s seasonality, and how investors should approach shares of the video streaming giant.
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Netflix stock  (NFLX) - Get Netflix, Inc. (NFLX) Report has appreciated around 5% since the beginning of 2021, going from $540 at the start of January to $569 as of the end of August. What is more impressive: the modest YTD gains, while market-lagging, followed massive returns of 67% in 2020.

Because of share price strength in the past 24 months, coupled with a June-to-August rally of 14%, some investors may fear that NFLX could retreat soon. Aside from justifiable tactical caution, MavenFlix maintains its generally positive view on this stock for the long term.

Figure 1: Netflix app.

Figure 1: Netflix app.

(Read more from MavenFlix: Netflix in Gaming: 3 Reasons To Buy The Stock Now)

Seasonality: what the past says about NFLX

Netflix has jumped almost 500% since 2016. Since then, January and December produced the best returns – while August, the worst. This seasonality pattern that favors the year-end months might be related to the holiday season, anticipation for the Academy Awards, or mere coincidence.

September has delivered an average gain of 2% which, in turn, has historically been the second worst of the year for NFLX. However, the month’s returns (annualized compounded rate of 27%) have still been high compared to the historical annual performance of the S&P 500, at less than 10%.

Worth noting, Netflix stock spiked more than 9% in August 2021 alone. Momentum, which started to build up in mid-June, could indicate a bullish cycle for this name and a better-than-average setup for the stock in September of this year.

Figure 2: NFLX average monthly return.

Figure 2: NFLX average monthly return.

Volatility and opportunities

For most short-term traders, a volatile market brings about opportunities. But for long-term investors, “calm seas” is the best-case scenario. Since last year, stock market volatility has declined progressively, and has now reached its lowest point since the start of the pandemic.

Low volatility today does not necessarily mean low volatility next month. Fears over inflation and rising interest rates could derail the market, particularly growth stocks like Netflix. But if the volatility trend continues, NFLX investors may feel confident owning the stock this month.

Figure 3: S&P 500 one-month realized volatility index.

Figure 3: S&P 500 one-month realized volatility index.

(Read more from MavenFlix: Netflix: Fewer Subscribers? No Problem. Here is Why)

MavenFlix’s take

Netflix is ​ a great company with strong growth prospects. An expanding TAM (total addressable market) in video streaming, the decline in liner pay TV, and the buildout of the network infrastructure in developing countries are key drivers supporting Netflix’s growth for years.

True, rich content costs are no laughing matter. Also, the space has become increasingly competitive. However, Netflix remains firm in its position of industry leader, and it has done a good job managing its cash while spinning out high-quality content.

Therefore, we believe that investing in Netflix today sounds reasonable for the long-term investor. Whether September will prove to be a bullish or bearish month for the stock may not be a very relevant question for those who subscribe to the multi-year growth thesis in video streaming, which we believe to be in its infancy still.

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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)