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Streaming companies like netflix (NASDAQ:NFLX) were once in favor among the investment community. However, shifting winds in the market put negative pressure on NFLX shares. However, a potential partnership with by Comcast (NASDAQ:CMCSA) NBCUniversal and alphabetical (NASDAQ:GOOG,NASDAQ:GOOGL) Google might convince you to buy Netflix stock for the long term.
One of the main differences between Netflix and network television is that Netflix did not rely on advertising. As a result, Netflix was able to deliver sharp, sometimes controversial content with mature themes.
Times are changing, however, and Netflix’s business model must adapt. Only time will tell if the company will continue to thrive, and Netflix certainly has its doubters. On the other hand, if Netflix can scale up and work with the right companies, this streaming star could shine again.
What’s going on with NFLX Stock?
It’s no secret that the overall stock market, tech stocks in particular, peaked late last year. High-growth names like Netflix haven’t fared well in the second half of 2022, and NFLX stock is well below its previous peak.
Believe it or not, Netflix stock price has reached $700 in the past year. Lately, however, the stock has been hovering around $180 and not advancing quickly.
It’s not a bad thing if you’ve been considering starting a position in NFLX stocks or adding to an existing one. Due to the falling share price, Netflix’s 12-month price-to-earnings ratio is down to just 16.24. In other words, Netflix went from high growth to high value.
Admittedly, it’s a scary proposition to buy a stock that has lost so much in value. Plus, not everyone wants to invest in Netflix as the company announces another round of layoffs.
A story of two price targets
Additionally, investors may be confused by Benchmark analyst Matthew Harrigan’s downbeat $157 price target on NFLX shares. Among other concerns, Harrigan cited “the inflation-ridden, more price-sensitive consumer” as problematic for Netflix, which has a subscription-based pricing model.
Indeed, inflation is at its peak and not everyone wants to pay for a Netflix subscription. However, Stifel (NYSE:SF) analyst Scott Devitt sees “optionality coming” from Netflix’s anti-inflation solution: ad-supported service levels for customers.
Devitt’s $240 price target for NFLX stock is optimistic and may be warranted as Netflix may already be considering a collaboration to develop ad-based options. According The Wall Street JournalNBCUniversal and Google have “emerged as the best suitors” for a possible partnership with Netflix.
Nothing was set in stone, so let’s not skip it here. Apparently, a Netflix rep said the company “is still in the early days of deciding to launch a cheaper, ad-supported option and no decision has been made.”
What you can do now
Just because no firm decision has been made doesn’t mean you should stay away. NFLX stock is trading at a relatively low valuation multiple and it may not stay at a favorable price for much longer.
Additionally, an announcement regarding a partnership to develop ad-supported levels could arrive any day. Therefore, it makes sense to hold at least some Netflix stock in anticipation of a new chapter in the company’s evolving business model.
As of the date of publication, David Moadel had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.