Shares of video streaming-giant Netflix (NFLX) closed out 2021 with quite a nasty correction, plunging by around 16% before bouncing back modestly.
As strong a year as it’s been for Netflix, its stock was not spared from the recent bout of broader weakness in the tech sector. Still, as a proven FAANG name with few dents in its armor, the year-end pullback may be more of a buying opportunity than a cause for concern.
Up 17% year-to-date (2021), Netflix has been a steady performer. Still, the name has been outpaced by the broader S&P 500. Indeed, Netflix needed to let earnings catch up to its hefty multiple, as investors look to brace for what could be a trio of rate hikes in the new year.
Netflix May Have a Wide Moat, After All
Realistically, there are so many “plus” video-streaming services that it’s hard to keep track nowadays. Still, Netflix has done a magnificent job of holding its own in video-streaming, even with the rise of new rivals across all corners of the media and tech space.
In terms of quality and quantity, nobody does it better than Netflix. Although, Disney (DIS) and its Disney+ service could give the streaming giant a better run for its money in 2022, with what appears to be a robust line-up of releases coming out of its pipeline.
While Netflix retains the video-streaming crown, one can only wonder what the company will look like once the metaverse is ready for prime time. Indeed, people will always have time for great films and TV shows. Still, the video viewing time of the average consumer may be challenged with the rise of next-generation virtual and augmented reality experiences that will accompany the rise of the metaverse.
Does Netflix have a plan to adapt to the age of the metaverse, as video viewership looks to become more challenged with time?
With recent video-game investments, I think Netflix is far better prepared than most other tech companies for the transition into the metaverse. As such, I remain bullish on NFLX and view the recent year-end dip as a great chance to add to a position.
Is Netflix Really Ready for the Metaverse?
Arguably, video gaming will be one of the biggest attractions of the metaverse. With the acquisition of various small-scale video-game developers, it seems like the managers over at Netflix already have their sights set on the next significant technological shift. Netflix is an innovative tech company and a streaming pioneer, after all. Although it is easy to forget such, as many of us now take video streaming for granted.
Netflix isn’t just scooping up video game studios to potentially improve its metaverse-transition prospects. A few months ago, Bloomberg reported that the streaming giant hired former Meta Platforms (FB) Oculus executive, Mike Verdu, as its vice president of game development.
Grabbing one of the top execs from the company that brought the metaverse to the front of the headlines is bound to get any firm’s secretive metaverse ambitions noticed.
For now, many are likely to discount Netflix’s gaming and metaverse push. The company currently has a small number of mobile game offerings for its subscribers. That said, a few mobile games could be the first step towards a vast library of interactive virtual experiences in the metaverse.
What About Video in the Metaverse?
The metaverse isn’t just going to be a place to game. It’s a compelling medium for next-generation entertainment as well.
Indeed, interactive “choose your own adventure” experiences similar to Black Mirror: Bandersnatch could be a hint of what to expect from Netflix in the metaverse.
Perhaps such an immersive experience sounds far-fetched today, but if there’s a firm with the technical capabilities to bring such an experience to us, it’s Netflix.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, NFLX stock comes in as a Buy. Out of 30 analyst ratings, there are 23 Buy recommendations, 4 Hold recommendations, and 3 Sell recommendations.
As for price targets, the average Netflix price target is $677.50 , implying an upside of 12.5%. Analyst price targets range from a low of $342.00 per share to a high of $800.00 per share.
The Bottom Line on NFLX Stock
Netflix CEO Reed Hastings is also no stranger to making high-stakes moves, and I think Netflix is a company whose expertise will translate very well into the metaverse. At the end of the day, Netflix is an entertainment company that’s well aware of what the metaverse has to offer.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
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