Squid games are hot, how long can Netflix's stock price fly?

Recently, a Korean survival thriller called "The Squid Game" quickly became popular all over the world after it was released. Only one month after its launch, the show has become the most-viewed original show by Netflix (NASDAQ: NFLX).

"Squid Game" is a big hit

According to the company's latest estimate, in the 23 days after the show was broadcast, the number of global viewers exceeded 132 million, more than the 111 million previously counted. Easily broke the record set by Netflix's other big hit "Bridgetown" set in 19th-century Britain, which was watched by 82 million users in the first 28 days of its broadcast.

Netflix also estimated that 89% of viewers watched at least one episode, and 66% of viewers watched the entire season in the first 23 days.

Even Amazon founder Jeff Bezos gave a positive review of the show, calling it "impressive and inspiring." Prime Video, Amazon's streaming media service, competes with Netflix.

According to Netflix's estimation, "Squid Game" has created an "impact value" of approximately US$891 million. The production cost of this drama is only 21.4 million US dollars, and each episode is about 2.4 million US dollars, which is much lower than the cost of Netflix's other large dramas. This means that the show has brought a huge return on investment for Netflix.

The stimulus of the epidemic subsided

In 2020, after the outbreak of the epidemic, the traditional offline entertainment industry has been suspended. Due to the blockade ban and panic about the virus, people are forced to stay at home. Bored people enjoy watching TV shows, which promotes the rapid expansion of the streaming media market, making Netflix one of the big winners of the epidemic.

But in 2021, with the increase in vaccination rates and the lifting of the ban, people began to get busy again, and the market demand for TV shows decreased, and Netflix's good days seemed to be over.

During the epidemic, Netflix’s subscribers surged, but the company’s subscriber growth is currently slowing down. Investors undoubtedly hope that Netflix’s subscriber growth in the most recent quarter will exceed expectations.

High-quality content boosts future earnings

On Tuesday, Netflix will announce its third-quarter financial report after the market. "Squid Game" may boost Netflix's future earnings.

Investors hope that the third quarter will be a turning point. Netflix expects to add 3.5 million subscribers in the third quarter, bringing the total subscribers to 212.7 million. According to media data, Wall Street expects Netflix to exceed expectations as it did last quarter, with 3.8 million subscribers expected to be added.

If Netflix achieves the above growth rate in the third quarter, based on the past 24 months, the company will add 54 million subscribers; and based on the past 12 months, the company will add 27 million subscribers; this will be in line with the epidemic The previous growth rate is the same. At the same time, this also shows that the unbalanced growth of the company's subscribers over the past 18 months has finally begun to stabilize.

JPMorgan Chase expects that high-quality content will boost Netflix's future earnings, and Q4 should be the strongest content quarter in Netflix's history. The third season of "You" (launched on 10/15), "Red Wanted Order" (launched on 11/12), the lower part of the fifth season of "Banknote House" (launched on 12/3), "The Unforgivable" (launched on 12/10) ), the second season of "The Witch Hunter" (launched on 12/17), "Emily in Paris" (launched on 12/22), "Don t Look Up" (launched on 12/24) and the fourth season of "Cobra" (Introduced on 12/31).

How long can Netflix's stock price fly?

We surveyed 43 Wall Street analysts' views on Netflix, and 85% of them are bullish, with an average target price of $633.65, which is almost the same as Monday's closing price of 628.29, with a target price range of $340 to $971.

But from a technical point of view, Netflix's stock price has been on an upward trend since June, and reached a new high of $646 in early October. Although the stock price has fallen from highs recently, the upward trend remains unchanged.

In summary, Netflix’s stock price has reached the market’s expected target, and the market has partially digested Netflix’s potential benefits. However, its high-quality content and technology support its stock price, and it may be more appropriate to give Netflix a “cautiously bullish” rating. Suitable.