Streaming media giant Netflix has taken home another award, this time from Wall Street: the top-performing stock of the decade.
Netflix started the decade with a subscription mail DVD service with 12 million subscribers paying $9 USD a month for the privilege. It ended the decade as the best performing stock of the whole period, with a more than 4,000 percent return, according to CNBC.
So if someone had invested $1 million USD in Netflix on January 1, 2010, it would be worth almost $43 million today. That’s a return of 4,181 percent, and it beats all other members of the S&P 500. The index as a whole is up 189 percent over the past decade.
It’s worth mentioning that Netflix was a relatively small company at the start of the decade, so its success was magnified by the fact that it had a lot of room to grow. While Amazon was sporting a $58 billion USD market value and a $135 stock price at the end of 2009, Netflix was still a $3 billion company with a stock price below $10.
The 2010s weren’t all good news, though. Netflix hasn’t seen a positive cash flow since 2011, which has led to a good bit of skepticism about the company’s business model. Creating content requires money, after all, and Netflix doesn’t profit off of ads or movie tickets the way a normal studio does. Every time subscription rates go up, consumers get angry. And keeping rates down will only become a bigger priority as competition increases (think Apple TV+, Disney+).
“The stock’s meteoric rise has always perplexed those investors who concern themselves with fundamental financial metrics like profit and cash,” reads the report. “The company runs on a thin — sometimes razor-thin — operating margin and has negative free cash flow, a reflection of how much it costs to buy and invest in the kinds of entertainment consumers want to watch. Furthermore, the ballooning roster of cash-rich competitors, ranging from Apple to Disney, is forcing Netflix to spend more on movies and TV shows to keep customers from canceling their membership.”
Michael Pachter of Wedbush Securities said Netflix will eventually see a huge decline, and eventually, his prediction will be right. He said Netflix is a “mythical stock,” and the company’s spending habits will catch up with it.