A FAANG Stock Is Dirt Cheap Right Now
FAANG was all the rage about a decade ago.
FAANG represented some of the largest, most dominant tech companies in the United States at the time.
It’s an acronym for Facebook (now META, ticker: META), Amazon (ticker: AMZN), Apple (ticker: AAPL), Netflix (ticker: NFLX), and Google (now Alphabet, ticker: GOOGL).
Today, everyone is obsessed with the Magnificent 7, which are the FAANG stocks plus Microsoft (ticker: MSFT), Nvidia (ticker: NVDA), and Tesla (ticker: TSLA), while removing Netflix.
But I wanted to talk about Netflix, the popular video streamer, because it deserves more attention than it’s getting.
Netflix isn’t as exciting as the stocks in the Magnificent 7.
There’s no AI play with Netflix, and the core business doesn’t appear to have enormous growth prospects.
As a result, Netflix’s stock price has taken a tumble over the past 12 months.
However, the stock price drop presents an interesting opportunity.
Now, Netflix’s stock is incredibly cheap.
Its price-to-earnings (P/E) ratio is only 23x, which is less than half its historical average.
The S&P 500’s PE ratio is higher at 25x, so Netflix is actually cheaper than the overall market.
The last time Netflix was cheaper than the S&P 500 was back in 2022, and Netflix’s stock price rose more than 500% over the next 3 years!
Why are people so down on Netflix right now?
Netflix was the early adopter when it came to video streaming.
But now it seems every media company has its own streaming service, and they’re eating away at Netflix’s market dominance.
However, Netflix’s growth doesn’t seem to be slowing.
Last year, revenue and earnings grew 18% and 46%, respectively, which are higher than their historical averages.
Part of the reason for the growth is Netflix raising prices on its streaming service.
Raising prices sounds great, but if Netflix continues to raise prices, it could lose customers to competitors and drop market share.
The part I’m most excited about is its expansion in developing markets.
Netflix is very popular in North America and Europe, with almost 80% of its revenue generated from those markets.
The breakdown only leaves 20% in South America and Asia, two fast-growing markets for video streaming.
Last year, revenue grew the fastest in Asia with over 21% growth.
Now seems like a great time to look at Netflix, and we haven’t even talked about its financials.
Netflix’s return on equity (ROE) is over 50%, which is one of the highest among media companies and an all-time high for the company.
Plus, Netflix’s PEG ratio is only 0.87x, which is lower than its industry average and near an all-time low.
The PEG ratio divides the P/E ratio by expected growth, which makes it easier to compare companies with different growth prospects.
Netflix’s low PEG ratio, especially compared to its peers, is a flashing neon sign showing the stock is very cheap right now.
So, give Netflix a look because it won’t stay at these low prices for long.
What are some of your favorite Netflix shows?
I’m always looking for recommendations!
Coach Parker
Category: Stocks
