Shares of streaming giant Netflix (NFLX) are really starting to heat up. Undoubtedly, the unexpected blockbuster series Squid Games showed us all why streamers ought to continue renewing their subscriptions, even with past price increases. Indeed, many consumers have shown they’re more than willing to pay up to get a greater quantity of high-quality content.
Although the video streaming market has become that much more crowded over the years, with movie theatres looking to make a comeback after nearly two years of hibernating due to COVID-19 restrictions, Netflix has continued to demonstrate its resilience.
Most importantly, the company is willing to adapt and evolve with the times, as it has in the past. Such a willingness to evolve should allow Netflix to sustain its growth as new technological trends emerge. I am bullish on Netflix stock, although the valuation is getting a tad frothy. (See Analysts’ Top Stocks on TipRanks)
From Squid Games to Video Games
Indeed, Netflix isn’t just a video streaming company anymore; it’s becoming an entertainment company, just as Meta Platforms (FB), formerly known as Facebook, seeks to become more than just a social media company.
Netflix, like its peers, can pivot and go to where the growth is. It’s a respected member of the FAANG cohort for a reason.
The Evolution of Netflix
With Meta looking to invest heavily in the metaverse, many firms have given the video-gaming industry a second look. Indeed, must-play Virtual Reality (VR) games and Augmented Reality (AR) experiences are vital to the metaverse’s success.
As Meta attempts to get more people to plug into its version of the metaverse, time spent watching films could go on the downtrend.
Indeed, gaming is a hot market, and given time is a limited resource, video content producers will need to be open to moving where the growth is to avoid the dreaded growth deterioration that tends to accompany a maturing company as it ages.
It’s not a mystery why the dominant big tech companies are hungry for a slice of the gaming market. The metaverse is coming, and with that will likely come a profound difference in the way people enjoy different types of content.
Undoubtedly, people will always love films and TV shows, but more personalized, interactive experiences made possible by the metaverse could be the next frontier. Netflix wants to play a significant role in this frontier, and it’s more than willing to spend to improve its chances.
Gaming Push Could Make Metaverse Push More Seamless
Netflix may be a bit slow to enter the gaming market, with the recent release of just five mobile games.
While just a handful of mobile games aren’t enough to get excited about, investors must realize that the under-the-radar mobile game releases may be just the start of what could be many titles across a wide range of platforms that could arrive over the next decade.
Moreover, a growing line-up of mobile games is arguably the most prudent way to move into a new market. Mobile games are better catered to a broader range of audiences. With such games included with a Netflix subscription, it’s become that much harder to cancel one’s Netflix account.
Who knows? Maybe one day, a must-play Netflix game could bring in Netflix subscribers instead of a film. It sounds far-fetched today, but given Netflix’s pace of game studio acquisitions, such a scenario, I believe, will be increasingly plausible, especially if the metaverse goes mainstream.
Wall Street’s Take
According to the Wall Street consensus rating, NFLX stock comes in as a Moderate Buy. Out of 34 analyst ratings, there are 26 Buys, five Holds, and three Sells assigned in the past three months.
The average Netflix price target of $680.88 implies just 0.1% upside potential. Analyst price targets range from a low of $342 per share to a high of $800 per share.
The Bottom Line on NFLX Stock
Indeed, the transition into the metaverse will be easier if Netflix, like many of its tech peers, can take a step back and broaden its focus.
As VR and AR headsets could become more commonplace over the next several years, look for Netflix to continue acquiring its way into the gaming space, all while it continues churning quality video content, fending off the likes of rivals like Disney (DIS).
Disclosure: Joey Frenette owned shares of Disney at the time of publication.
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