Netflix (NFLX) has given long-term investors plenty to cheer about. In the past 15 years, NFLX stock has averaged an annual gain of 28.9%, easily outpacing the S&P 500's 14.8% total return (price change plus dividends). The streaming giant's next move could encourage a new crop of folks to look its way.
After the close on Thursday, October 30, Netflix announced that its board of directors approved a 10-for-1 stock split. It will begin trading on a post-split basis at the open today, November 17.
This marks the third stock split for Netflix: A 2-for-1 split on February 11, 2004, and then a 7-for-1 on July 14, 2015.
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"The purpose of the stock split is to reset the market price of the company's common stock to a range that will be more accessible to employees who participate in the Company's stock option program," Netflix said in its press release.
Shares closed at $1,154.23 on Friday, November 14, a price point that's out of reach for most retail investors.
What does the Netflix stock split mean?
As for Netflix's stock split, it won't change anything about the company's fundamentals or market valuation. Rather, a stock split is similar to making change. In NFLX's case, it will be equivalent to breaking a $10 bill into 10 $1 bills.
Based on NFLX's November 14 close, the 10-for-1 stock split brings the share price to just over $111 at Monday's opening bell. This makes it much more attractive for retail investors, as well as Netflix employees participating in the company's stock purchase plan who were unable to buy NFLX stock at its former four-figure share price.
O'Reilly Automotive (ORLY) underwent a similar stock split earlier this year. The auto parts retailer cited the importance of keeping its share "more accessible to team members and investors" as the reason behind its 15-for-1 split. Financial firm Interactive Brokers (IBKR) also split its stock recently.
Wall Street says Netflix stock's still a buy
Netflix gapped lower in October after the streaming company missed third-quarter earnings expectations due to an expense related to an ongoing dispute with Brazilian tax authorities, but analysts don't seem too concerned.
"Netflix's Q3 results and Q4 guidance underwhelmed investors after several quarters of phenomenal results," said Wedbush analyst Alicia Reese. "With much still to prove, we think Netflix is positioning for substantial growth in global advertising, and that should not be overlooked."
Reese added that recent data checks suggest subscriber growth is continuing and price hikes are being absorbed with little resistance. Plus, "Netflix continues to enhance its ad business by expanding partnerships, improving targeting, and adding more live content. We expect ad revenue to become Netflix's primary revenue driver beginning in 2026, with significant opportunities in 2027."
Reese has an Outperform (Buy) rating on Netflix stock and she's hardly alone in her bullish outlook toward the communication services stock.
Of the 49 analysts covering Netflix stock tracked by S&P Global Market Intelligence, 26 say it's a Strong Buy, eight have it at Buy, 13 rate it a Hold and two have it at Strong Sell. This works out to a consensus Buy rating.
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