Netflix (NASDAQ:NFLX) generated plenty of excitement last week surrounding its 10-for-1 stock split, seriously lowering its share price and making NFLX more attainable for retail investors.
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Still, as analysts and bloggers alike are happy to repeat (and repeat), stock splits don’t actually impact company valuations. Nor does a split affect the fundamentals of a company.
And yet, companies that split their shares are those that tend to be doing well, as the general purpose of this action is to lower prices after a strong period of growth.
While the buzz is certainly there, are the stars aligned for NFLX to experience more growth? Top investor Will Ebiefung believes they are.
“The streaming giant still has plenty of room for expansion,” explains the 5-star investor, who is among the top 2% of stock pros covered by TipRanks.
Ebiefung acknowledges that Netflix’s market cap of well over $400 billion could scare off growth-focused investors. And yet, the investor points to opportunities for Netflix to increase revenues from existing customers via both price hikes and advertising. Ebiefung notes that some analysts are predicting that Netflix could generate $10 billion in annual revenues from this segment by decade’s end.
Moreover, while growth in the U.S. and other developed markets will be slowing, Netflix has sizeable opportunities to increase its footprint overseas.
“For example, Netflix has a market share of just 13% in India, and the developing country will become an increasingly valuable market over time as wealth in the region grows,” adds Ebiefung.
The investor also mentions that Netflix is on track to spend $18 billion on content in the current year, with a good chunk of it devoted to markets beyond North America.
That’s not to say that challenges won’t pop up along the way. Ebiefung accepts that the streaming industry is becoming increasingly competitive, as other providers and their vast quantities of intellectual property are taking on Netflix.
Still, the company’s fundamentals are clicking along, as revenues from its most recent quarter of $11.5 billion reflected a 17% year-over-year increase. In addition, live sports and original programming serve as a constant draw for the viewing public.
In other words, it’s not just buzz, but the fundamentals that make NFLX worthwhile.
“Shares are still an attractive buy,” concludes Ebiefung. (To watch Will Ebiefung’s track record, click here)
That’s generally where Wall Street is as well. With 27 Buys, 7 Holds, and 1 Sell, NFLX enjoys a Moderate Buy consensus rating. Its 12-month average price target of $138.75 implies potential gains north of 30%. (See NFLX stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.