Meet the FAANG Stock That Has Quietly Outperformed Every "Magnificent Seven" Stock — Except One. It Still Has Plenty of Upside, According to a Certain Wall Street Analyst.
Once upon a time, the FAANG stocks were all the rage. For the better part of a decade, Facebook (rebranded Meta Platforms), Apple, Amazon, Netflix (NASDAQ: NFLX), and Google (now Alphabet) were among the market’s most consistent performers. Each company dominated its respective industry and provided a windfall for determined investors who stayed the course.
Well, Wall Street is a fickle mistress, and with the advent of artificial intelligence (AI), investors shifted their focus to the future. Most of the FAANG stocks made the transition to a new collective — the now-vaunted “Magnificent Seven” stocks, a term that came into being in late 2023. This group is made up of Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Nvidia, and Tesla.
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In an interesting turn of events, the one FAANG stock that was left by the wayside has outperformed all its FAANG peers and all but one of the Magnificent Seven stocks. If you guessed Netflix, you’re right on the money.
Below, I’ll look at what brought the streaming giant back from the brink, and why it’s hitting new all-time highs.
Netflix was a pioneer in the streaming video market, laying the groundwork for all the competitors that came after. It has long been the undisputed leader in the field in terms of subscribers, and after years of negative cash flow and ballooning debt, Netflix finally turned the corner and made good on its promise of strong and consistent profitability.
After a pandemic-induced growth spurt, Netflix became a victim of its own success. The combination of decades-high inflation and tough comps sent fair-weather investors to the exits, and the exodus was dramatic. Between October 2021 and July 2022, Netflix stock shed 75% of its value.
Even as the stock price cratered, the business kept chugging along, with Netflix adding millions of new subscribers. Perhaps as importantly, the company continued to increase its revenue and earnings.
Over the past year, and without much fanfare, Netflix has quietly outperformed every FAANG and Magnificent Seven stock — except Nvidia. That’s a momentous accomplishment indeed.
As its growth slowed, Netflix made a couple of strategic decisions that paved the way for its success. At the risk of alienating long-term customers, the company announced a password-sharing crackdown, but its execution was brilliant. Netflix allowed users to add additional paid members for just $8, and the mass defection of subscribers many predicted never came to pass. The company also introduced a lower-priced tier that included advertising, which appealed to viewers on tighter budgets.
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