Why Is Netflix Inc (NASDAQ:NFLX) Outperforming in 2020?

While the market remains depressed owing to the continued turmoil, Netflix Inc (NASDAQ:NFLX) is one of the few large-cap stocks that have managed to record highly impressive gains in 2020 so far. The stock has gained as much as 30% in 2020 so far, while the S&P 500 declined by 5% during the same period.

Major Events

The coronavirus pandemic and the associated lockdowns led to a major spike in subscriptions, which effectively accelerated Netflix’s growth considerably. While the gains are impressive, it might not exactly be a straightforward question for investors who are looking to invest in Netflix at this point.

The company is almost certain to grow significantly over the long term, but if investors get into the stock in anticipation of similar returns that it recorded in 2020, then they are probably going to be disappointed. The market had been worried about the company’s subscriber growth in the first quarter, but the lockdowns triggered the addition of 2.3 million new Netflix subscribers in North America alone. Moreover, the growth in the crucial global market was equally impressive. Subscribers grew by 9% in Latin America, 22% in Asia-Pacific, and 13% in Africa, the Middle East, and Europe.

While it is true that Netflix managed to generate positive cash flow in the quarter, it is soon expected to record negative cash flows. In the future, the company’s long term growth is expected to generate positive cash flows and not an abrupt growth in subscriber numbers. The road ahead is also going to be uncertain for the company as it tries to create positive cash flow consistently, and that is going to see a fair amount of fluctuations in its stock price.

One thing that investors can do is to track the Netflix stock closely and then possibly buy the stock when it dips. At the end of the day, the stock could well prove to be a good long term investment.

About Travis Garlick 1791 Articles
Been writing about and trading stocks since 2013. Manage a group of micro-cap investors on Facebook with over 15,000 members. Turned $8,500 into 185k the first year I started trading stocks and haven't looked back.