Netflix, Inc. (NASDAQ:NFLX) has seen its share price rise 13% in the past month and in the last year the stock has more than doubled. But just how much higher can the stock go?
The company is facing several headwinds and Walt Disney Co (NYSE:DIS) announced last year that it would be pulling content from Netflix and hosting its own streaming service. We're seeing a growing trend where companies are choosing to host their own content rather than having it available on a streaming service like Netflix. From a consumer standpoint this may be a little frustrating since now you may need several subscriptions to see shows from different networks, and that could negate the savings from cord cutting.
While Netflix has been growing internationally, domestically its sales have been struggling. And although it has been producing its own content, it will now have to rely more and more on its own shows and movies to generate growth. The problem that I see is that Netflix will be battling with Disney and other content producers, and will now have to beat them at their own game.
With the stock trading at more than 250 times its earnings, the company will have to keep growing at a strong rate in order to justify its high share price. We won't see where all the chips fall until we see what happens with Disney, but it's inevitable that Netflix will lose subscribers, and the question is just how many.
Netflix has been doing well over the years, but over the long term it'll be harder to maintain market share with so many different options and with budgets getting tighter as a result of rising interest rates. There are short-term gains to be made from owning the stock today, but it's not one I would hold for now.
