Netflix (NFLX) announced a 10-for-1 stock split on October 30, but the stock has since declined 13%. Historically, stocks that split have rebounded, averaging a 25% return in the year following the announcement, according to Bank of America. Analysts believe Netflix is undervalued, with a median target price of $115—indicating a potential 22% upside from its current price of $94.
Despite missing earnings expectations in its recent first-quarter report, Netflix’s revenue grew 16% to $12.2 billion, and net income surged 84% to $1.23 per diluted share, bolstered by a one-time termination fee. Analysts see the post-earnings dip as a buying opportunity, especially with Netflix’s price increases and a strong advertising business potentially driving growth.
Investors should consider Netflix’s current valuation of 30 times earnings attractive, especially given its projected 21% annual earnings growth over the next few years. The stock’s recent decline may provide a strategic entry point for those looking to capitalize on its long-term growth potential.
Source: fool.com