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One of the signs of a solid company is that it can swim against the tide of a negative market trend. In the last couple of weeks, as most stocks have been treading water or falling, Netflix (NASDAQ: NFLX ) has continued its steady path upward.
The price has more than doubled just since the beginning of 2018, and is now around $420 a share. Some analysts are saying it could go to $500. Is that a real possibility, or will the stock fall to earth?
The media landscape is changing rapidly. AT&T (NYSE: T ) just got the go-ahead to purchase Time Warner (NYSE: TWX ), and Disney (NYSE: DIS ) and Comcast (NASDAQ: CMCSA ) are battling to see which one can take over Fox.
Netflix's market capitalization has risen so quickly that is not worth more than $175 billion. That's a bigger market cap than Disney, which has been a top company in the entertainment sector for almost a century.
Usually, a stock that has risen so quickly would be seen as a risky play. But there are reasons to think Netflix has the stuff to keep rising.
Like HBO, Netflix has been able to make the transition from recycling other companies' content to producing its own. Several of the most popular and highly acclaimed TV shows of the last few years - The Crown , Stranger Things , Orange is the New Black , Unbreakable Kimmy Schmidt - have been Netflix originals.
One hurdle for the company has been getting viewers to pay for an extra subscription when there are so many shows already available through the basic cable package. But the distinctiveness of its programming has helped in this endeavor, and now the company is making it easier for viewers to access the service while traveling.
Netflix just inked a deal with Dish Network (NASDAQ: DISH ) that will let hotel guests stream Netflix programs using Dish's Evolve service.
To be sure, the company still has serious competition. Amazon (NASDAQ: AMZN ), owned by the richest person in the world, has been beefing up its original programming. The newcomer iQiyi (NASDAQ: IQ ), sometimes billed as "the Netflix of China," may limit the firm's ability to penetrate the lucrative East Asian market.
But Netflix's management has already shown that it is willing and able to deal with potential pitfalls in a proactive way. The company reports its second-quarter results on July 16, and is likely to show another big increase in sales.
When that happens, the momentum could carry the stock all the way to $500.
As of this writing, Thomas Scarlett did not hold a position in any of the aforementioned securities.
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