How High Can Netflix Inc. Fly After Posting Strong Earnings?
Investors in the tech sector looking for growth have been well-rewarded in recent years as consumers continue to pour money into service subscription companies such as Netflix Inc. (NASDAQ:NFLX). Netflix has just reported its Q4 numbers, and much to the surprise of analysts and the market in general, posted numbers which were far better than expected leading to a significant valuation bump in early trading today.
As of the time of writing, shares of Netflix were up more than 10% as investors continued to digest the company’s addition of two million more subscribers, a number which was much higher than the anticipated 1.3 million subscribers and the 1.25 million guidance number previously given by the company’s management team.
Growth is everything with a company like Netflix, and if the company’s business model can continue to garner top and bottom line growth from its ever-expanding base, long-term investors may be served well by continuing to hold shares of the streaming company indefinitely.
That said, for investors interested in potentially initiating a position following this news, I would advise caution given the extremely high valuation multiple ascribed to Netflix, despite its impressive growth rate. While the company’s PEG ratio (Price-Earnigns to Growth) remains just above 1, a relatively healthy range, expectations that the company will be able to continue at its current pace or speed up its pace of growth remains to be seen.
Invest wisely, my friends.