Netflix Stock: Post-Split Decline

Netflix’s stock has returned to its pre-split levels from two weeks ago, but it’s actually cheaper now.

So, it’s been a week since Netflix carried out its 10-for-1 stock split, which lowered the price from $1,125 per share to about $112.50. However, the situation worsened for investors since then. After reaching $110 from $112.50 on Monday, the stock continued to drop, hitting just $104 today.

Interestingly, there’s no clear explanation for this trend.

To put it simply, Netflix’s shares are on a downward path.

So, what does this mean for investors? Well, looking back to 2016, Netflix shares were valued higher than they are now, around $115 prior to the split. Yet, revenue back then was considerably lower. The company’s profit for the entire year of 2016 was roughly $187 million, translating to about $0.04 per share.

Fast forward nine years, and Netflix’s stock sits just above $100 per share again after the split. Still, the earnings report reveals a significant jump with about $39 billion in profits, which breaks down to $1.98 per share last year. That’s quite a difference, indicating a 50-fold return despite the stock being just 10 times the price.

This means, if you invest $1 in Netflix today, you’re likely to earn five times what you would have made nine years ago. Seems like a decent offer, right? Plus, considering that the stock has dipped 7% recently, it could make the investment even more appealing.

To sum it up, even if you missed the early opportunities after the stock split, you still have the chance to jump in. It’s ultimately up to you to decide if Netflix’s current valuation is sensible. The stock has a price-to-earnings ratio of 42.5, with a long-term growth forecast of 25%. If you think Netflix is worth investing in, it’s not too late to make that move.

Sometimes, waiting can be a smart strategy—not to mention the stock price might rebound even more.