Netflix (NASDAQ:NFLX) stock has really heated up alongside its FAANG peers in recent quarters, thanks to renewed optimism for next-gen tech firms. Undoubtedly, it’s been a painful fall from grace for the streaming giant, as concern surrounded the sustainability of its growth rates going into a potential recession. Getting freeloaders to pay up and the inclusion of ads in a lower-cost tier have been just some of the levers that Netflix’s managers have pulled the steady the ship amid harsher economic waters.
It was tough to give Netflix the benefit of the doubt when it reached multi-year depths late last year. However, those who did have been rewarded with some very handsome gains, and the gains from NFLX stock’s current rally may not be over yet. Even with the legendary Reed Hastings foregoing his CEO title, I still believe the streamer has a lot to prove.
Being a FAANG stock entails growth, and Netflix will need to do a lot more if it’s to keep growth going strong as the streaming and media industry begin to mature. Industry maturity and tougher rivals are never a good formula for earnings growth. Regardless, Netflix still has quality by its side and several potential pathways it could pursue to remain the king of streaming content. I am bullish on the stock.
The Netflix of the Future May Make Good Use of AI Technologies
The AI boom has been difficult to ignore. Undoubtedly, tech companies with AI exposure have surged, even in the face of economic and rate-related headwinds. Netflix may not be an AI company, but it’s one that could have a lot to benefit as AI works its way into the streaming and content production scene.
The company already has impressive algorithms that tailor content to specific viewers. Moving forward, we could see AI help assist in various areas of content production. Netflix Japan has already reportedly incorporated AI in the background of an animated short film. I must say it’s pretty impressive.
Although some content creators may feel that AI is after their jobs, I do believe that AI will never be able to completely replace the creativity of humans. Editing, writing, and all the sort are still valuable skills that AI is unlikely to replace fully. If anything, AI could help make the jobs of creators easier and better.
In any case, it’s hard not to notice the backlash from writers at WGA (Writers Guild of America), who fear AI could eat away at employment prospects. It’s a huge concern if regulations to protect human jobs are not put in place promptly. Fortunately, I do believe the writer strike will get the message across, both to industry top dogs and federal regulators.
Moving forward, it’s difficult to gauge how much Netflix will use AI when comes to content production. If it does decide to replace human creators, we’ll be entering uncharted territory. The billion-dollar question is whether quality will be comprised.
Netflix Needs to Get AI Right and Avoid Becoming Like Streamberry!
Netflix’s latest season of the hit show Black Mirror had an episode named “Joan is Awful” that was a startling take on what streamers could be in for in the AI deep-fake age. In the episode, a streaming platform named Streamberry gave us a glimpse of what could go wrong as streaming platforms embrace next-generation technologies like AI deep fakes and quantum computing to make viewers the “star of the show!”
I won’t spoil the episode, but I believe it’s a given that Netflix likely doesn’t want to go down the same path as Streamberry. Just because a technology can offer a unique experience for a lower cost doesn’t mean ethical boundaries won’t be crossed.
Fortunately, I do believe Netflix can find ground where it can incorporate next-generation AI technologies to enhance the experience while minimizing harm. AI is a very powerful but potentially dangerous technology if left unchecked.
In any case, Netflix is a pioneer when it comes to next-generation entertainment experiences. As we move into the AI, AR, or VR age, look for Netflix’s technological capabilities to help it take streaming to the next level.
Is Netflix Stock a Buy, According to Analysts?
Turning to Wall Street, NFLX stock comes in as a Moderate Buy. Out of 35 analyst ratings, there are 19 Buys, 13 Holds, and three Sell recommendations. The average Netflix stock price target is $401.42, implying downside potential of 4.1%. Analyst price targets range from a low of $230.00 per share to a high of $535.00 per share.
The Bottom Line on Netflix: It’s Still a Tech-Savvy Growth Stock
What will Netflix’s growth rates look like in the future? It’s hard to tell at this juncture. Regardless, I believe the firm can grow into its 45.5 times trailing price-to-earnings multiple with the help of some cutting-edge tech.
