Shares of Netflix (NFLX) have been dragging their feet of late, and are now down around 12% from the highs it hit back in January 2021. The streaming giant seems to be stuck in a rut after consolidating wildly in the $500 range. Undoubtedly, competition in the streaming video on demand (SVOD) is continuing to pick up traction, with many big media and tech companies hungry for a growing slice of the pie.
That's bad news for the king of streaming. But time and time again, it's been shown that betting against Netflix top boss Reed Hastings is typically a bad idea, even when it seems like the chips are down and the competition is moving in.
Many of us remember the days of Blockbuster Video and Netflix's attempt to disrupt the market by mailing DVDs. In the glory days of Blockbuster, the folks at Netflix were laughed out of the office when they proposed a partnership offer. Undoubtedly, we all know who had the last laugh. Reed Hastings and his team rose to the occasion even though it seemed like the odds were heavily stacked against their DVD plan. (See Netflix stock charts on TipRanks)
Netflix: From Disruptor to Disrupted?
Today, the competition is moving in, and it's moving in fast. Disney (DIS) and its foray into the SVOD space have been a profound success. Disney now poses a serious risk to Netflix, but don't think that Hastings and his team will back down without a fight. We're talking about the undisputed heavyweight champion in the SVOD scene, after all!
While it seems like the title is Netflix's to lose, investors would be wise not to discount the capabilities of management and its ability to expand into new verticals, most notably gaming. As Netflix plays defense in SVOD, it also looks equipped to go on the full offensive in gaming.
Yes, many pundits may laugh at Netflix's attempt to break into the gaming market. Yet history suggests that Netflix will be the one the will have the last laugh, at the expense of the doubters.
Netflix Could Have Game
Netflix raised some eyebrows when it announced its intention to get into gaming, starting with mobile and exploring other platforms in due time.
Yes, many PC and console gamers may be inclined to slam mobile gaming for Netflix, as the streaming giant wanders outside of its circle of competence. On the other hand, given that mobile is the fastest-growing gaming market, the move just makes sense. The mobile market is bigger, and the value proposition could be far greater for the casual crowd that chooses to binge-watch shows on Netflix over playing games on their specced-out PCs.
Now, Netflix isn't aiming to charge its customers more for its video game offering. However, it does have the flexibility to hike prices down the road, if its move into gaming shows promise.
Indeed, Netflix will be up against many of the same competitors pressuring it in video streaming, most notably Apple (AAPL), which enriches its customers’ lives with Apple Arcade, its mobile gaming subscription service, and Apple TV+, its SVOD service. Both video and gaming are bundled as a part of the Apple One subscription service, an incredible value for Apple customers.
As Netflix offers a video and gaming bundle of its own, it could unlock a new leg of growth. As such, investors would be wise to have a closer look at shares while they're stuck in limbo, before they have a chance to breakout.
Yes, gaming won't move the needle anytime soon. That said, Netflix's growth story has been enhanced, and it could power higher, even if its mobile gaming foray has limited success.
Wall Street’s Take on Netflix
According to TipRanks’ consensus analyst rating, NFLX stock comes in as a Moderate Buy. Out of 30 analyst ratings, there are 20 Buy recommendations 7 Hold ratings, and 3 Sells.
As for price targets, the average Netflix price target is $602.23. Analyst price targets range from a low of $342 per share to a high of $700 per share.
Disclosure: Joey Frenette owned shares of Netflix at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.