Netflix, Inc. (NASDAQ:NFLX) stock edged closer and closer to $300 per share back in June of 2011. A peak on June 8th, a little over two years ago, ended in a low of below $65 by the end of November. On today’s market, shares in the video streaming company are trading at around $288. Netflix, Inc. (NASDAQ:NFLX) investors are hoping the patterns do not repeat.
Shares in Netflix have increased by more than 17% in the last month, and more than 33% in the last three months. Since the start of the year, the stock has more than tripled in value. With a P/2012E of more than 350, Netflix, Inc. (NASDAQ:NFLX) is trading on the presumption of massive growth. Things may not be that different from 2011.
Content versus users
Netflix, Inc. (NASDAQ:NFLX) is on a different path right now, at least for investors, than it was in 2011. With so many people circulating that Kevin Spacey speech and so many binge-watching Arrested Development, Netflix, Inc. (NASDAQ:NFLX) is now a content creator, rather than a streaming service.
Netflix didn’t have all that much of a competitive advantage in video streaming, and most of its advantage lay in its brand. With content creation, it is argued, the company could charge a higher price for its services than competitors do, and they could expect to keep enough customers to drastically increase revenue.
According to the current narrative, Netflix, Inc. (NASDAQ:NFLX) isn’t competing with Amazon Prime all that much; it’s competing with premium cable. Shows like House of Cards and Arrested Development show that the company is able to make premium content, but they haven’t shown an ability to increase revenue while keeping user numbers the same.
Netflix bubble about to burst?
Netflix, Inc. (NASDAQ:NFLX) really needs to perform in order to keep its stock price stable. It’s likely that the company will need to raise additional funds from the market in the coming year or two, as it has many times before. The higher the price of the stock, the easier raising capital will be for the company.
Netflix, Inc. (NASDAQ:NFLX) is trying to disrupt a market that has always proved difficult to profit from. The fact that investors are expecting tech growth from what is being sold as a television company is interesting, but it might end in tears for investors. As the stock approaches $300, many investors are surely fighting the impulse to sell.