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Media-streaming veteran Netflix (NASDAQ: NFLX) has split its stock twice. The last split was a dramatic 7-for-1 affair in 2015. With share prices heading upward again, Netflix stock is back to a lofty $436 per share. Is it time for another stock split in Los Gatos, California?
This wouldn't be Netflix's first stock-splitting rodeo. The company executed a 2-for-1 split on Feb. 12, 2004. A more impactful split followed on July 14, 2015. That time, each Netflix share was split into seven stubs.
The splits didn't change Netflix's market value, of course. Likewise, they didn't affect the value of an investor's shares. A stock split simply redistributes the same market value among a different number of shares. As an example, let's imagine buying 100 Netflix shares just before the first stock split and follow them through the years:
Why 100 shares? So-called round lots were the style at the time. Even if your brokerage allowed smaller trades, it was just easier to work with multiples of 100 shares in 2004. (Hold that thought -- I'll get back to lot sizes in a minute.)
As you can see, the stock splits boosted the number of shares in your pocket but didn't make a significant difference to the total value of your Netflix investment. The company's market cap was approximately $1.85 billion in the days before and after the 2004 split. It sat near $42 billion around the 2015 split after 11 years of Blockbuster-crushing DVD shipments and online video streaming innovation. The pie was split into a larger number of slices, lowering the price of each stub but leaving the total value untouched.
Netflix never published an official reason for its first two stock splits, but companies that do explain them usually focus on making their stock more attainable for ordinary people. This was more important back in the day, when the smallest investment you could make was 100 shares. These days, most brokerages will gladly let you buy a fractional share. If you only have $100 to invest this month, you could pick up roughly one-fifth of a Netflix share, for example. Things sure have changed on Wall Street.
In that light, the 2-for-1 split that brought Netflix's stock price down from $72 to $37 made sense in 2004 but wouldn't be necessary now. I mean, the 2015 split resulted in a stock price of roughly $100 after the split. Nowadays, stock splits tend to come along when a stock is priced at several hundred dollars. That's where Netflix stands right now, so a quick adjustment would make sense.
It has been eight years since the last split. The company isn't exactly itching to split its stock again. In particular, a split would have looked more reasonable when Netflix shares traded at nearly $700 in the fall of 2021. The retreat to less than $200 in 2022 started with the global inflation crisis and accelerated when Netflix ran into a brick wall of slow subscriber growth. The company runs under a more profit-oriented business model now. The strategy shift is paying dividends, but Netflix's stock price is nowhere near record levels.
So I don't expect a stock split announcement anytime soon. If and when a split comes along, it won't change anything about Netflix's business results, long-term growth opportunities, or market value. Those are the things that influence share prices in the long run, and they're how I will continue to evaluate the company with or without a stock split.
And from that point of view, Netflix is chasing bottom-line profits and renewed sales growth with newfangled tactics such as account-sharing crackdowns, ad-supported subscription plans, and a rapidly growing portfolio of video games. The ongoing strikes among Hollywood's actors and writers may hamstring next year's content releases and slow down Netflix's growth again, but that's just another short-term speed bump. If you can afford a Netflix share today -- or a fraction of a share, if your brokerage allows it -- the stock still looks like an awesome long-term bet on the global video-streaming opportunity.
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I subscribe to a plethora of stock market information services. It comes with the job, you know. Earlier this week, several of these tools sent me a whole lot of news announcements, nearly buzzing that phone out of my pocket. I was in for an eye-opening discovery.
According to these unexpected notifications, Netflix (NASDAQ: NFLX) just split its stock. Oh? Maybe they announced it in that game-changing earnings report and nobody noticed? I guess it could happen.
These stock splits, all taking place on Wednesday, didn't actually involve the American stocks. Every single announcement was about each company's presence on the Argentinian stock market, at the Buenos Aires exchange.
Yes, Netflix and Apple really did split their stocks this week, but not because their listings on the NYSE and Nasdaq exchanges were growing too pricey. Most of them may get there soon, and I wouldn't be terribly surprised to see a normal Netflix split someday soon -- but Bank of America's shares only cost $33 each.
Things look very different on the Buenos Aires exchange, where investors must struggle with Argentina's incredible hyperinflation. Here, Netflix trades at roughly 14,700 Argentine pesos per share after Wednesday's 3-for-1 stock split. That's about $18 at current exchange rates. But things change fast in Argentina. In early December, the same stash of pesos was worth $41. A year ago, it was $79. It's no wonder that American companies feel the need to adjust their share prices amid this catastrophic exchange-rate trend.
The U.S. dollar's inflation rate briefly soared to 9.1% in June 2022. It was a painful jump with game-changing effects on business and personal finance in this country, sparking heavy-handed anti-inflation policies from every level of our government.
You might think the prices of American stocks on the Buenos Aires exchange are a low priority in times like these. However, Argentinians with the means and foresight to invest in these stable value stores have a powerful financial tool in their hands. As the peso loses its value, alternatives such as stocks, physical gold, or Bitcoin (CRYPTO: BTC) become incredibly important. Other defensive options include real estate holdings, cars, or bills and coins in foreign currencies such as the dollar.
The total value of Netflix, Toyota, and Apple shares on the Buenos Aires market are always in lockstep with their underlying American counterparts, filtered through the effective currency exchange rates and different number of shares. Tapping into your foreign stock holdings (and other stable assets) can keep food on your table when the pesos in your pocket are turning worthless.
This reminder of the Argentine inflation crisis may not improve my investing strategy by much, but those buzzing notifications opened my eyes to the sheer scale of this monetary disaster. Now I understand why Netflix pointed to the falling peso as a 3% currency-exchange headwind for its top-line growth in the next quarter. And the American situation doesn't seem likely to mirror the Argentine crisis anytime soon, but a healthy reserve of gold or Bitcoin could be a life-saver if the next local inflation crisis is any worse than the recent one.
These stock splits, initially a curiosity, reveal the profound impact of global economic shifts. They underscore a vital truth for investors: the importance of vigilance in an interconnected world and the wisdom of diversifying beyond the traditional stock market. Diversify, stay alert, and maybe keep some Bitcoin or gold handy for a rainy day -- because when it rains on the scale of a national economy, it really pours.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Anders Bylund has positions in Bitcoin, International Business Machines, and Netflix. The Motley Fool has positions in and recommends Apple, Bank of America, Bitcoin, and Netflix. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
Trying to remember a short Netflix series about a world that experiences a catastrophic event where it splits into two separate but identical halves. Each half is a whole image of the original world, with each starting out with identical copies of the people within the original world. Each world subsequently experiences very different development.
Contained many images reminiscent of East and West Germany, presumably during the late Cold War. One side releases a pathogen into the other with devastating consequences, and the series ends with a retaliatory release of a pathogen as payback. Anyone know the name of the series?
Counterpart is an American science fiction thriller television series starring J. K. Simmons. It was created by Justin Marks and was first broadcast on the premium cable network Starz. The series ran for 20 episodes across two seasons. It premiered on December 10, 2017, and aired its final episode on February 17, 2019.
The differences between the two worlds become more pronounced after 1996, when a flu pandemic killed hundreds of millions in the Prime world, setting back the world technologically but advancing it in life sciences. The virus was suspected of being purposely released by the Alpha world into the Prime world, which resulted in a tense cold war between the two worlds, with counterparts used as spies and sleeper agents. Silk's Alpha world continues to resemble ours, but the Prime world becomes quite different. Howard Silk Prime is a ruthless intelligence operative. Matters escalate during the series when a powerful rogue faction on Prime executes long-simmering plans to get revenge on Alpha.
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