We recently published a list of 12 Best Quality Stocks to Invest in Now. In this article, we are going to take a look at where ABC stands Netflix, Inc. (NASDAQ:NFLX) against other best quality stocks to invest in now.
Tom Lee, co-founder of Fundstrat Global Advisors, believes that a significant rebound is in the offing, despite the tough start to the year. The strategist opines that there is a possibility of ~10% – 15% bounce over the coming months. In an interview with CNBC, he stated his expectations about March, April, and May witnessing the rally. Therefore, missing critical trading days can be a mistake for investors.
What Lies Ahead?
Lee believes that investors can consider buying as the markets are unsettled. In an interview with CNBC, he went on to explain that the market’s 10 best days last year resulted in the addition of up to 20 percentage points for the broader S&P 500. However, if we exclude these 10 days, the index increased by only 4%. According to him, the best days might be around the corner. If there are tensions related to the growth or related to the employment market, Trump or the US Fed can intervene to bring some stability. These are the favourable catalysts for the upcoming weeks, says Lee. Overall, he believes that a large chunk of the bad news has been priced in as markets have seen a significant decline.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Signs of Economic Strength Remain
Morningstar, while echoing the views of Adam Hetts (Janus Henderson Investors portfolio manager), mentioned that the longer-term perspective is expected to provide investors a silver lining. Hetts believes that there are bright spots in the international markets such as Europe and China, that have surpassed the performance of the US stocks since the beginning of the year. Even though the mega-cap tech stocks have been declining, they are getting cheaper as compared with the elevated valuations just a few months ago.
According to experts, there are several signs of economic strength. Gus Faucher, chief economist for PNC Financial Services Group, told Morningstar that consumers continue to spend amidst weakness in the sentiment data. Also, the labor market has been holding up. Overall, the chief economist doesn’t see any sort of fundamental weaknesses in the broader economy that can signal a problem. As per Morningstar chief US market strategist David Sekera, the investors are required to focus on the fundamentals and valuations, while maintaining a long-term view.
Our Methodology
To list the 12 Best Quality Stocks to Invest in Now, we sifted through the holdings of iShares MSCI USA Quality Factor ETF. Next, we chose the stocks that are popular among hedge funds. Finally, the stocks were arranged in ascending order of their hedge fund sentiment, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A home theater with family members enjoying streaming content together.
Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 144
Netflix, Inc. (NASDAQ:NFLX) offers entertainment services. Bernstein analysts, including Laurent Yoon, maintained an “Outperform” rating on the company’s stock with a price objective of $1,200.00. In a bid to continue its growth trajectory, the company has been seeking ways to expand its total addressable market (TAM) and improve user engagement. Netflix, Inc. (NASDAQ:NFLX)’s recent ventures into live events and sports are being considered as part of the growth strategy. Elsewhere, Rosenblatt Securities analyst upped the company’s stock from “Neutral” to “Buy,” placing a price target of $1,494.
As per the analyst, Netflix, Inc. (NASDAQ:NFLX)’s pivot to sports content has been benefiting the streaming giant and continues to put pressure on traditional TV rivals. The company’s ad-supported tier offers a strong opportunity for revenue growth and market expansion. By providing a lower-priced option, Netflix, Inc. (NASDAQ:NFLX) is well-placed to attract price-sensitive consumers who were earlier hesitant to subscribe. Also, the ad-supported tier can help the company maintain its competitive edge by offering a more affordable option in markets.
RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q4 2024 investor letter. Here is what the fund said:
“Netflix, Inc. (NASDAQ:NFLX): NFLX was a top contributor in the fourth quarter powered by a 3Q earnings report that included stronger-than-expected revenue and operating income, solid subscriber additions, and positive forward commentary. Anti-password sharing and ad tier initiatives continue to drive subscriber growth while improving revenue per user trends, from recent price increases, drive margin expansion. The company was optimistic about future revenue growth, margin expansion, free cash flow generation and future return of capital programs.
The recent re-acceleration of subscriber growth, plus price increases on premium memberships and a stabilization of content investments, should position the company for low double digit annual revenue growth over the next few years while driving operating margin to more than 25%. We also believe that the stabilization of content spend should allow the company to continue to scale its free cash flow.”
Overall, NFLX ranks 9th on our list of best quality stocks to invest in now. While we acknowledge the potential of NFLX as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than NFLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.