Skip to main content

Netflix Stock: Why It Could Be a Good Buy in January

Netflix stock impressed us in 2021. But will NFLX still be a winner in 2022? We have some reasons to believe so.

During 2021, Netflix  (NFLX) - Get Netflix, Inc. Report showed great results. Its valuation grew by more than 15%. And it surpassed its competitors -- such as Amazon  (AMZN) - Get Amazon.com, Inc. Report and Disney  (DIS) - Get Walt Disney Company Report -- in several metrics.

Shares jumped from $520 in January 2021 to over $600 in 2022, leaving many investors happy with the company's results in such a difficult year.

However, this strong valuation has some investors and analysts worried about the future of NFLX. Can the stock continue to rise?

Let's delve into some reasons why buying NFLX could be a good strategy.

Figure 1: Netflix content portfolio.

Figure 1: Netflix content portfolio.

(Read more from the MavenFlix: Disney Stock: Should You Buy It in the Beginning of 2022?)

Monthly Returns Show an Opportunity

Looking at Netflix's monthly returns can show investors an incredible opportunity. Since the company's IPO, NFLX has posted an average return of 18% for the month of January.

Investors can take advantage of this to see potential gains from the stock early in the year.

Figure 2: NFLX Average monthly return.

Figure 2: NFLX Average monthly return.

In addition, even if this historical return isn't delivered, the stock has a tendency to reward investors in the following months. In February and March, the company has delivered an average of 3% and 4%, respectively.

Is NFLX Stock Overpriced?

Compared to its competitors, NFLX did very well in 2021, with cumulative growth of roughly 16%. Other stocks that compete in the video streaming segment saw worse returns. For example, Amazon shares appreciated only 5%, while Disney suffered a drop of nearly 20%.

Figure 3: AMZN, DIS, NFLX and SPY performance.

Figure 3: AMZN, DIS, NFLX and SPY performance.

However, NFLX's performance looks less stellar when compared to companies outside the streaming segment. In fact, the stock underperformed the S&P 500 in 2021.

As Netflix stock moves away from its November peak, there may still be room for the company to grow.

Our Take

Even after appreciating more than 15% in 2021, we believe that NFLX still has plenty of room to continue growing. And most analysts agree with us.

Figure 4: NFLX EPS surprise & estimates by quarter.

Figure 4: NFLX EPS surprise & estimates by quarter.

Looking at earnings per share (EPS) estimates for 2022, many analysts project year-over-year quarterly growth of 15% and 20%.

We believe that Netflix can continue to be a good long-term investment for investors who are constantly looking for quality companies.

(Read more from the MavenFlix: Spotify Stock: 3 Reasons to Buy It In 2022)

(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)