So far this year, the FAANG companies have been major influences on key global indices like the S&P 500 and the Nasdaq. One of these influential companies is Netflix (NFLX), a streaming platform.
Investing in one of the most popular streaming platforms could be a very lucrative opportunity. But how can you invest in Netflix? What’s the price of its shares? Does it pay dividends? This article provides you with all the essential information to invest in Netflix.
What is Netflix?
Netflix is an American entertainment company that offers streaming services for movies, television series and original content. Founded in 1997 by Reed Hastings and Marc Randolph, Netflix has become one of the main players in the global streaming industry. Let’s briefly see its history:
- 1997: Netflix was founded by Reed Hastings and Marc Randolph in 1997, after after Hastings got frustrated paying a $40 fine for returning a movie late. The initial idea was to provide DVD rentals through mail service.
- 2000: Blockbuster dismissively rejected a merger with Netflix. At that time, Blockbuster was the dominant force in movie rentals.
- 2007: In a groundbreaking move, Netflix introduced streaming in 2007, allowing users to access content online without physical DVDs. This innovative approach laid the groundwork for its future success and revolutionised the entertainment industry.
- 2013: The streaming company ventured into original content production with the series “House of Cards”. This bold strategy allowed them to establish themselves as a renowned content creator.
- 2016: Already consolidated in the streaming market, Netflix took the leap by expanding to more than 130 countries around the world.
- 2017: The company made history by winning its first Academy Award. The documentary “Icarus” won the Best Documentary award, proving the high quality of content produced by the platform.
- 2020: Despite global challenges, Netflix reached an impressive milestone of 200 million subscribers worldwide.
- 2021: Netflix ventured into the gaming industry, further diversifying its entertainment offerings.
General Information about Netflix
- Headquarters: Los Gatos, California, United States
- Ticker: NFLX
- ISIN: US64110L1061.
- Listing: Nasdaq
What did Reed Hastings do for Netflix?
Reed Hastings is an American entrepreneur known for co-founding Netflix. He holds degrees from Cambridge and Stamford universities. Hastings’ fame primarily comes from his pivotal role in creating Netflix.
Reed Hastings founded Netflix in 1997 with the initial concept of renting DVDs through mail service. However, his vision evolved rapidly.
In 2007, he introduced the revolutionary idea of streaming, forever changing how we enjoy entertainment. Hastings’ daring approach to producing original content, expanding globally, and venturing into gaming has propelled Netflix to its current status as a streaming giant with millions of subscribers worldwide.
What is Reed Hastings’ current role at Netflix?
In early 2023, he stepped aside as a co-CEO (2020-2023) to become the executive chairman, a position he still occupies at press time.
Who holds the CEO position at Netflix?
Ted Sarandos and co-founder Greg Peters now share the responsibilities of co-CEOs at Netflix. Ted Sarandos has been associated with Netflix since 2000 and has played a crucial role in expanding the company’s original content offerings.
Story behind Netflix
The origins of Netflix trace back to an incident in the 1990s. Reed Hastings, frustrated by a fine imposed for returning a rented movie late to a video store, recognised the potential of a business model centred around mailing movie rentals.
Teaming up with Marc Randolph, Hastings established Netflix as a DVD rental service by mail. The idea was straightforward: challenged by the practices of major video stores that profited more from fines than rentals, Hastings proposed a catalogue-based DVD rental service without fines. Customers would only be able to rent a new movie after returning the previous one.
As time went on, Netflix developed an artificial intelligence prototype that analysed user preferences. This technology provided personalised recommendations for movies and series based on users’ rental history and ratings.
It was common for customers to receive movie recommendations along with their mailed DVDs—suggestions for upcoming rentals based on their viewing preferences. This practice continues today, albeit in the online format.
How to invest in Netflix stock in 5 steps? | Practical example with CMC Markets
Let’s walk through a simple step-by-step guide on how to invest in Netflix stock using the CMC Markets broker as an example:
Step 1: Open an account with CMC Markets
Start by creating an account with CMC Markets.
Visit the CMC Markets website and follow the prompts to register. Provide your basic personal information like name and email address. You’ll receive an email with instructions. The online registration process takes around 10 minutes.
You’ll need to provide KYC documents (a government-issued ID and proof of address) and complete a basic financial knowledge test to determine your experience and risk appetite.
Step 2: Deposit funds
Once your account is set up, deposit funds into it.
CMC Markets offers different deposit methods, such as credit cards, bank transfers and other online payment services; the method that best suits each case can be chosen and the desired amount deposited. CMC Markets offers various deposit methods such as credit cards, bank transfers, and online payment services.
Choose the method that suits you and deposit the desired amount. Note that there’s no minimum deposit requirement; you can start with as little as £10.
Step 3: Search for Netflix stock with ticker NFLX
Within the CMC Markets platform, find the stock search function (usually at the top left corner). Type in “Netflix” or its stock ticker “NFLX”. For instance, if using a demo account, you can type “Netflix” and select the option ‘Netflix Inc Shares’.
Step 4: Add order details
Next, you need to fill in the order details, such as how much you want to invest and any other relevant details (such as stock order type).
Step 5: Buy Netflix shares
Once your order details are set, simply click to send the order to the broker. If you choose to buy at market price, and the stock exchange is open, then you should be able to see your purchased Netflix stock in your account right away.
For more details about this broker, check our CMC Markets review.
Where can I buy Netflix shares? | More alternatives
Here are some other brokers with which you can buy Netflix shares:
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- More information: eToro review
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- 📈 Platform: xStation 5 (Proprietary)
- More information: XTB review
- 🏆 Regulation: SEC, FCA
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- 📈 Platform: Multiple platforms
- More information: Interactive Brokers review
Minimum lot for Netflix shares
By default, the minimum lot for Netflix shares is usually 1 share. However, in cases where brokers offer fractional shares, the minimum will depend on each broker. For instance, with eToro, you can invest as little as $10.
Does Netflix pay dividends?
Netflix does not distribute dividends to its shareholders. This approach aligns with the company’s growth-focused strategy, where profits are reinvested into expanding content offerings and acquiring new subscribers.
Rather than offering cash dividends, Netflix prioritises long-term returns and the appreciation of share value. This strategy helps Netflix stay competitive in the streaming entertainment industry and proves its growth-oriented nature.
Reasons to consider buying Netflix shares
Having discussed what Netflix is and how and where one might consider investing in the company, the question remains: Why invest in Netflix? Here are several reasons to consider:
FAANG’s impact on the SP500
Netflix is a core member of the FAANG group, which comprises prominent technology companies like Facebook, Amazon, Apple, and Google. Its prominent position within the SP500 index underscores its market significance and capacity to generate sustainable returns.
Key role in artificial intelligence investment
From its inception, Netflix has led the way in technology adoption, particularly in Artificial Intelligence (AI) investment. This commitment has significantly enhanced content personalisation and recommendations, leading to higher user satisfaction and engagement on the platform.
Netflix’s ability to predict and cater to user preferences through AI algorithms provides a strong competitive edge in the streaming sector.
Exploring advertising revenue
In contrast to its ad-free plans, Netflix has begun exploring the inclusion of ads before or during most series and movies. This strategic move has the potential to open up new revenue streams for the company.
By adding advertising income to its existing revenue from over 235 million paying accounts, Netflix could diversify its income sources and further support its growth trajectory.
Netflix share performance – how much do Netflix shares cost?
Netflix, as a robust growth company, has consistently exhibited substantial growth over the years.
Despite a challenging 2022 for the markets, particularly for technology firms, Netflix has emerged as a leader in the 2023 stock market recovery. Much of this resurgence can be attributed to the strength of the FAANG group. While Netflix’s stock price hasn’t yet reached its historic peak, it has surged by over 50% in 2023 and more than 100% since its low point in May 2022.
In 2022, Netflix’s shares experienced a significant decline, dropping by over 50%, largely due to two primary factors. Firstly, the loss of nearly 1 million subscribers during the year was triggered by its departure from the Russian market. Secondly, concerns about rising interest rates weighed heavily on a company with a substantial debt load.
Nevertheless, Netflix displayed its capacity for resilience by initiating a remarkable recovery. The decision to delay the termination of account sharing in 2022 significantly contributed to this rebound. The latter half of the year witnessed an impressive resurgence, culminating in a net addition of 7.6 million subscribers by the end of 2022. This achievement not only underpinned Netflix’s resilience but also established a historical benchmark for navigating uncertain scenarios.
Expert opinions on investing in Netflix
Another perspective when considering investing in Netflix involves assessing the opinions of experts and investors regarding the company’s future prospects.
For this, we can turn to the Yahoo Finance portal, a platform that often features expert opinions. Among 36 analysts, the prevailing sentiment leans toward a cautious but generally positive stance. The consensus opinion is “Buy” and “Hold” suggesting a patient approach to investment. This aligns with the well-known strategy of buy-and-hold.
What companies are competing with Netflix?
Netflix faces several competitors in the streaming market.:
The online entertainment sector is marked by fierce and ever-evolving competition. This dynamic compels Netflix to continually innovate and provide captivating content to retain its market position.
How to invest in Netflix: summary
In conclusion, investing in Netflix proves to be an opportunity guided by strategic decisions and careful consideration. As the streaming giant continues to shape the entertainment landscape, its growth trajectory and position within the FAANG group exemplify its market importance.
Why doesn’t Netflix pay dividends?
No, Netflix does not pay dividends to its shareholders. The company’s focus on aggressive growth and reinvesting profits into content expansion and subscriber acquisition takes precedence over distributing cash dividends.
Why should I consider investing in Netflix?
Investing in Netflix presents opportunities due to its prominent position within the FAANG group, its pioneering investment in Artificial Intelligence for personalised content, and potential plans to include advertising for new revenue streams.
How did Netflix perform in recent years?
After a challenging 2022, marked by a significant drop in share price due to subscriber loss and interest rate concerns, Netflix made a remarkable recovery in 2023. The stock grew by over 50% this year and has doubled in value since its low point in May 2022.