Why is everyone talking about Netflix Stock?
netflix (NFLX -1.21%) says that the last season of stranger things achieved a major milestone, attracting more than 1.1 billion hours of viewing.
It’s further proof of Netflix’s ability to develop programming that consumers want. It comes as the company grapples with losing subscribers amid growing competition and declining consumer demand for home entertainment.
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Interesting way, stranger things became only the second Netflix show to surpass one billion hours watched. The other, squid game, was a popular Korean-language thriller that generated widespread word-of-mouth. Viewership numbers like this are a good sign for Netflix subscriber retention. As long as it keeps churning out hits like these, people will be willing to pay the monthly subscription fee for the service. Indeed, the show was so popular that it briefly crashed the Netflix app as viewers flocked to watch.
However, it remains to be seen if the hit series has helped attract new subscribers to the service. The company lost 200,000 subscribers in its first quarter, which ended March 31, its first such loss in more than 10 years. Management expected to lose another 2 million in the second quarter, but that was before they knew that stranger things would attract more than a billion hours of viewing. There is a real possibility that the hype of the series has attracted new subscribers.
That would do wonders for Netflix, which has seen its stock price drop 73% from its highs. The business flourished when billions of people spent more time at home at the start of the pandemic. Now that out-of-home experiences are more in demand, people are spending less time streaming content at home. As a result, Netflix announced two rounds of job cuts to maintain profit margins as revenue growth slows. The company is also planning an ad-supported tier to attract cost-conscious customers who have been hesitant to subscribe.
Ultimately, viewers pay streaming services for content. The popularity of stranger things is further proof of Netflix’s ability to create content that consumers love. This ability is what will drive long-term shareholder returns. If a streaming provider can’t keep refreshing the service with new and exciting content, it will lose subscribers to the service who can.
What this could mean for Netflix investors
Netflix is relatively new to the content creation game. It has a less proven ability than rivals such as waltz disney (SAY -1.61%), which delivered hits for several decades. This lack of proven experience is a liability for the share price, as investors view Netflix as riskier. The fact that stranger things landing more than a billion hours of viewing is another notch in its belt that will help reduce its risk in the minds of investors.
It could also be an excellent time for potential investors to add Netflix stocks to their portfolios. The results of stranger things have not yet been reflected in the company’s financial statements. It publishes its second quarter results on July 19. Investors considering adding Netflix stock may want to do so before then, when management reveals the revenue and subscriber growth impacts of the hit series.
Parkev Tatevosian has positions in Netflix and Walt Disney and has the following options: long calls of $105 in January 2024 on Walt Disney. The Motley Fool holds posts and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: January 2024 long calls at $145 on Walt Disney and January 2024 short calls at $155 on Walt Disney. The Motley Fool has a disclosure policy.