Netflix Finally Splitting Its Stock, Investors Cheer The Move

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Netflix Finally Splitting Its Stock, Investors Cheer The Move
NFLX Photo by Matt Perreault

Netflix announced a 7-for-1 stock split on Tuesday, making its stock more accessible to retail investors. The move ends the wait for investors who found Netflix shares too expensive to buy after the unprecedented spike in price. Following the news, shares of the streaming firm were up almost 2% in after-hours trade on Tuesday.

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More valuable than traditional players

A spilt was highly anticipated as shares of the streaming firm have gained 182% over the last 12 months, making Netflix one of the highest priced stocks on the Standard & Poor’s 500, says a report from USA TODAY. Netflix’s decision to split its shares highlights the rising popularity of the streaming firm. Netflix, which is now worth $41 billion, is more valuable than traditional media players CBS or Viacom.

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Investors as of the markets’ close on July 2 will be getting their split-adjusted shares on July 14. Previously, Netflix split its stock in February 2004. At that time, shares of the streaming firm were trading at around $73, and the company offered a 2-for-1 deal.

After the split, Netflix will have seven times more outstanding shares, which currently amount to 60.6 million, but the value of each share will decline from $681.19 to around $97.31. With other things unchanged, the market value for Netflix is expected to remain the same at $41.3 billion.

A sensible move from Netflix

Netflix’s split follows a similar move by other tech firms, including Google and Apple. In June of last year, Apple offered a 7-for-1 deal. This year so far, seven S&P 500 companies have chosen to split, while in all of 2014, 11 companies choose to split their stock, according to a data from S&P Capital IQ.

In terms of highest per-share prices on S&P 500, Netflix is now only behind Berkshire Hathaway, Priceline and AutoZone. These shares closed on Tuesday at $211,900, $1,155.95 and $684.54, respectively. On the S&P 500, only 13 stocks trade over $300 share, according to S&P Capital IQ.

Splitting its stock is a sensible move from the streaming firm as it will help in attracting more retail investors to the company, which has witnessed a sharp gain in its stock price. More importantly, it’s not stopping. BTIG analysts recently gave a $950 price target to the streaming firm, which represents a 40% upside potential from current levels.

In pre-market trading today, Netflix shares were up 2.58% at $698.75, and year to date, the stock is up by almost 100%.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@wordpress-785388-2679526.cloudwaysapps.com
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