How to Buy Netflix Stock: Invest in Your Favorite Streaming Service
In the era of cord-cutting, Netflix is one of the top entertainment alternatives people subscribe to. If you’ve chosen to cut the cable cord and subscribe to Netflix instead, you likely see the value they offer as a company.
Happy customers often wonder how they can invest in the companies they enjoy purchasing goods or services from. Netflix might be one of the companies that you think you should invest in.
Before investing, you need to evaluate a company's financial position and future potential. You then need to compare that research to the stock’s current price.
Based on a full analysis, you can determine if you believe a company may be a good investment for you.
If you decide you want to make stock purchases based on your research, here’s how to buy Netflix stock.
As always, make sure you consult with your financial advisor before making any major investment decisions.
Netflix: Company Overview
Netflix is mainly a streaming service company that focuses on the entertainment needs of its customers. Netflix also offers a DVD subscription service, but it isn’t as popular as it used to be.
In addition to a vast library of movies and TV shows, customers also have access to Netflix’s original content they can’t view elsewhere. Its original content helps draw new subscribers that wouldn’t be interested in watching old movies or reruns.
Netflix serves its content ad-free which makes for a nicer viewing experience than some of its competitors. For instance, certain Hulu subscriptions still show ads even though you pay for the service.
Netflix makes money from the subscription fees users pay for the service. Depending on the streaming package a person chooses, the fees could be as low as $8.99 per month. The premium plan costs $15.99 per month.
If customers opt for the DVD plan, that costs $7.99 or $11.99 per month depending on the plan chosen.
In 2019, Netflix had over 150 million subscribers which adds up to quite a bit of revenue.
Netflix incurs many costs to run its business, as well. They have to pay to get the rights to stream old movies and TV shows. They also have content costs for creating original Netflix content and a ton of other expenses you should explore in detail before you invest.
Major Netflix competitors
Netflix isn’t the only streaming company out there.
It has quite a few competitors that are looking to gain subscribers, as well, including:
These are just a few of the many streaming companies competing with Netflix today.
Every year, it seems like even more competitors pop up, too.
How to Research and Analyze a Company
Now that you understand some of the basic information about how Netflix makes money, you need to dig deeper.
The reality is:
Each person investigates a company in different ways before they invest.
Some rely on their personal opinions of a business’s services.
Others dig deep into technical information the companies provide.
Public companies, such as Netflix, are required to provide a significant amount of financial information in regulatory filings.
- income statements
- balance sheets
- statements of cash flows
Once each year, public companies provide audited financial statements in a 10-K filing.
Additionally, companies provide updates on a quarterly basis in 10-Q filings. These filings are a treasure trove of information.
The company also shares other information about its management team, predicted future financial performance and how they see the business evolving over time in these reports.
Compare to competitors
You can compare this information to its competitors. That way, you can see if the company you want to invest in is the best company within a group of competing companies.
For example, you may want to compare the subscriber growth numbers between companies to see which ones are growing and which ones are shrinking.
When analyzing a company, you want to make sure you do enough research that you’re comfortable it is a good investment that can help you reach your goals.
The definition of a good investment may also vary from person to person. For most people, it’s an investment that will provide a decent return in the future.
Determining good value
Once you understand a company’s financials, you need to determine whether the company’s stock is a good value.
If the stock price is too high, you may not want to buy shares in even the best performing companies.
Even after significant research, things don’t always go as planned.
Sometimes the best companies on paper may end up faltering or may not be worth buying.
You can still end up losing money on an investment even if you spend weeks investigating it thoroughly.
Have a Plan for Your Investments
If you do decide a company may be a smart investment, you also have to decide how you plan to make money from the investment.
Some people prefer to buy stocks and hold on to them for the long term.
Others want to take advantage of quick opportunities and buy or sell individual stocks quickly based on stock market movements.
Based on your research, determine whether you see a long term or short term opportunity for the stock you want to buy.
Then, create a strategy to execute on the opportunity you see.
How to Buy Netflix Stock
Technically, Netflix’s company name is Netflix Inc and it is listed on the NASDAQ exchange.
Its ticker symbol is NFLX.
You can buy stocks such as Netflix in many ways.
Buy shares of Netflix directly
The most common way to purchase shares of a company is through a brokerage account.
After you open a brokerage account, you need to place a buy order to buy shares of Netflix.
Within your brokerage account, you can typically choose to use a market order or a limit order to purchase NFLX shares.
A market order buys the number of shares you requested at whatever price the stock is trading for on the market at that time.
A market order focuses on purchasing shares quickly rather than at the best price possible.
A limit order, on the other hand, allows you to set a maximum share price you’re willing to buy shares at. This can help you make sure you don’t pay more than you want for your shares of Netflix.
However, if the order can’t be fulfilled at or below your limit order price, the transaction won’t go through and you won’t buy the shares.
This can be frustrating but can keep you from overpaying for a stock.
Buying shares of Netflix indirectly
Of course, buying shares directly isn’t the only way to own Netflix’s stock. You may already own Netflix stock and not even know it.
If you own any mutual funds or ETFs, chances are good you could already own a small portion of Netflix shares.
Mutual funds and ETFs own many investments. While some mutual funds and ETFs focus on other investments such as bonds, many focus on stocks.
As of the time of this writing, the American Funds Growth Fund of America owned over 5% of Netflix’s outstanding stock. If you own this mutual fund, you indirectly own Netflix stock.
Index funds are another common way you may own Netflix stock indirectly.
Common indexes that include Netflix as of the time of this writing include:
- NASDAQ 100 Index
- S&P 100 Index
- S&P 500 Index
If you own any index funds that track these indexes, you likely indirectly own shares of Netflix through these funds.
Owning shares of Netflix through a mutual fund or ETF may be better than directly owning shares of Netflix for some people.
Mutual funds and ETFs generally aim to diversify holdings for you. If Netflix starts performing poorly, other investments within the mutual fund or ETF may help offset those losses.
Mutual funds that invest in the same sector may not always fully diversify you, though.
If all streaming companies start declining and you own a streaming-focused mutual fund, all of the investments may decline at the same time.
Don’t Forget to Consult Your Financial Advisor
Now that you understand how to buy Netflix stock, you have to decide if it’s the right move for you.
Before you make any investment, it might be a good idea to consult with a fiduciary financial advisor.
For some people, stock trading isn’t the best idea. For others, it may be a great way to invest. Your financial advisor can help guide you through this decision.
Once they help you decide if stock trading is a good move for you, they can look at your personal finances.
They can help you determine if you’re making a smart investment based on your other potential uses for the money.
Ultimately, you have to decide what is your best bet for owning shares of the company of your choice.
Remember, you can buy Netflix shares using a brokerage or indirectly own Netflix through mutual funds or ETFs.
Either way, carefully consider your options if you want to be invested in Netflix or any other company.