Netflix stock in the spotlight: What about a third stock split at Netflix?

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• Stock splits trending in FAANG stocks
• Netflix stock posts strong returns despite price slumps
• Another split coming?

Tesla, Amazon, Alphabet – and Netflix stock splits?

Especially among tech companies, whose share prices have increased significantly over time, stock splits can be the method of choice to not leave out small investors. They make the share certificates look cheaper by dividing them in a certain ratio. New investors can therefore use lower prices to get started, for investors who already hold shares in the company in their portfolio, only the quantity changes, but not the equivalent value as of the reporting date. In a two-to-one stock split, investors get one additional share for each existing share, while the share value is halved. Prominent examples of this in recent months have been Tesla, Amazon and Alphabet. But what about another member of the FAANG squad, which consists of Facebook, Amazon, Apple, Netflix and Google?

Netflix stock lures with strong returns despite price slumps

Like the entire tech industry, shares in the streaming provider Netflix have recently suffered from increased interest rates, which are causing the high valuations of internet shares to falter. Since the beginning of the year, the share on the NASDAQ has already fallen by 55.49 percent to USD 268.16 (closing price on October 20, 2022). In the long term, however, the share is still well into the plus: Netflix began trading on the technology exchange in May 2002 with an initial price of 15 US dollars. Over the past decade, investors have been rewarded with an average return of 40.20 percent, according to data from Morningstar. This puts the Netflix share well above the industry average of 8.96 percent. Nevertheless: The current price level is a long way from the all-time high of 691.69 US dollars, which the share marked in November 2021.

Previous Netflix stock splits 2004 and 2015

However, stock splits are not a new phenomenon for Netflix: as early as 2004, the streaming giant announced a two-for-one split. “Our fourth quarter performance and the announced stock split reflect the strong, organic and sustained growth of the Netflix model,” said CEO Reed Hastings confidently in a press release at the time. “Robust growth will continue in 2004, as will efficient investments in those initiatives that will gain momentum in 2005 and beyond.” As of February 2, 2004, existing Netflix shareholders received one share for each share in their portfolio.

The Los Gatos, California-based company then carried out another stock split in 2015 – but this time at a seven-for-one ratio and in the form of a stock dividend. On July 14, 2015, all shareholders who held shares as of July 2 received six additional shares.

Is the third stock split coming soon?

So how likely is it that Netflix will do another stock split in the near future – despite the weakened share price? Speaking to Capital.com, AJBell analyst Danni Hewson said the stock could see its price drop further, if not by a seven-to-one ratio. But the fact that Netflix is ​​a brand with “a bit of high gloss” speaks for it. A split could not only attract more investors, but also give employees the opportunity to participate in the company. However, according to the expert, this should not happen any time soon. “Taking that path now would signal that it has lost confidence in its plans to launch advertising options on its platform, plans that are gaining traction among investors, although there is still great caution at traditional growth companies,” Hewson said .

Editorial office finanzen.net

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