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If you’ve ever binge-watched “Stranger Things” or “Orange Is the New Black,” you know how powerful Netflix’s programming can be. But does Netflix's stock have the power to multiply your money?
No doubt people who invested in Netflix years ago aren’t sorry they did. The company started trading publicly at about $1.20 a share in 2002. Netflix's stock price is currently hovering in the $500 range.
Does this growth — and the fact that you spend your weekends with Netflix — mean you should buy Netflix stock? Here's what to consider before you do:
1. The fundamentals of Netflix stock
In a sector as fast-moving as the online entertainment industry — hello, YouTube TV! — it’s hard to know what new technology or product is just around the corner or which company might start producing popular original content, just like Netflix did.
That means doing your research to make sure you understand the risks — from competing technologies, programming and more — so you can prepare yourself for potential bumps in the road. Read Netflix’s recent earnings reports. Find out what analysts have to say about the company and the industry. For more tips, see our guide on how to research stocks.
Researching a company can help you see the risks — and it can highlight the potential rewards. If, after doing your research, you decide Netflix is a stock you want to keep playing, then read on.
» Access stock research: Read our review of Morningstar
2. Consider Netflix in the context of your investment plan
Even if a company’s financials are stellar and its share price has nowhere to go but up, that doesn’t necessarily mean the stock is a good fit for you.
For example, maybe you’ve already got a big chunk of your investment money in high-growth (and potentially high-risk) technology stocks. You might not want to add more money in this sector.
Or, maybe the money you can afford to lose is already tied up elsewhere. You don’t want to put Junior’s entire college fund into one technology stock.
Another consideration is your time frame. Are you going to need this money in five years or less? If so, it probably shouldn’t go into the stock market because you don’t have enough time to sit out a market crash.
The best way to make a smart investment decision is to have a clear sense of your financial goals for this money, and a sense of how diversified (or not) your overall investments are.
If you know that you’ve got at least five years to let this money ride and that investing in Netflix fits your overall financial plan, then read on.
» View our list: The best-performing stocks
3. How much you can afford to invest in Netflix
You’re almost done! The final two questions: How many shares do you want to buy? What type of order do you want to use?
For the “how many shares?” question: You can buy individual shares of Netflix at any online broker. Keep in mind that the decision of how much to invest should be based on a variety of factors — if you don't already have a diversified portfolio and a solid emergency fund, for example, you may want to limit your investment in an individual stock like Netflix for now. If Netflix's sticker price is too high for you, keep in mind that some brokers will let you dip your toes by buying fractional shares, which is a portion of the stock rather than the full thing.
For the “what type of order?” question: Two of the most common types are “market” orders and “limit” orders. With a market order, you’re telling the brokerage to buy the stock as soon as possible. The final price might be slightly higher or lower than the price you see when you place the order. A limit order tells your broker that you only want to buy the stock at a specific price, with the caveat that, if the stock isn’t available at that price, your order won’t go through.
Got more questions? Check out our guide on how to buy stocks.
Once you’ve invested your money, you’re pretty much done. Of course, you want to keep watching your investments. At some point, you might find it’s time to sell. Fingers crossed, you have an ending that's more “Love Actually,” less “Black Mirror.”