Netflix, the world’s largest streaming service, saw a sharp reversal in its share price after revealing it suffered its first drop in paid subscriptions in more than 10 years.
Shares of the company fell about 35% to $226 in early 2022 as investors braced for the company to lose millions of subscribers over the next few months.
Netflix offered a relaunch of its business model and the launch of a discounted subscription service with ads for the first time. But that didn’t stop hedge fund Pershing Square Capital Management from offloading its stake in the company with a reported loss of more than $400 million.
Will other investors follow? Or do they sense an opportunity to buy one of the best-known names in the media business at a discount or are they waiting for his fortunes to rebound?
Only time will tell. Here’s what you need to know if you’re considering buying — and selling — Netflix stock.
How to buy stockss
There are several steps to go through once you have made sure of the reasons for buying stock in a particular company.
1) Open an account
Whether you’re a seasoned stock trader or someone new to stock market investing, if you want to buy Netflix stock, you’ll need to open an account with a regulated brokerage.
Brokerage services for do-it-yourself investors come in a variety of forms – from online investing platforms run by some of the biggest names in financial services to investment trading apps that run on your smartphone or tablet.
Before opening an account:
- keep your ultimate financial goals in mind
- be prepared for the ups and downs of the stock market
- aim to keep trading costs to a minimum
- Remember that you may have to pay taxes when selling shares.
Before buying stocks, ask yourself:
- should I take financial advice?
- am I comfortable with the level of risk?
- what is my budget?
- can I afford to lose money?
- do I understand the company I am looking to invest in?
- Am I protected if my platform provider/advisor goes bankrupt?
2) Where is Netflix sold?
Netflix’s ticker symbol is NFLX. The company is listed on the Nasdaq in the United States. Nasdaq trading hours are 9:30 a.m. to 4 p.m. (US time) Monday through Friday.
Check that you can buy US stocks through your brokerage account and watch for foreign transaction fees.
Under the US-Australia Double Taxation Agreement, there are specific tax rules governing income dividends.
Stock dividends are taxed in the United States. US corporations must withhold and remit 30% of stock dividends to the US Internal Revenue Service (IRS), which can generally be reduced to 15% if investors file a valid Form W-8BEN for the IRS. You may be able to claim this withholding tax when preparing your Australian tax return as part of a Foreign Income Tax Offset (FITO).
However, as each case varies, it is worth speaking to a dedicated tax agent about your individual situation.
3) Do your research
To learn more about Netflix, go online and visit the company’s investor relations page.
4) What is your investment strategy?
People tend to invest either with a lump sum purchase or with smaller amounts over time. The latter method is often referred to as an “average dollar value” way, a stock market hack that can help you pay less per share on average over time. Rather than waiting to build up a lump sum, this means that an investor’s money is immediately used in the market.
5) Place an order
Once you’re ready to buy stocks on Netflix, log into your investing account or trading app. Type in the stock symbol NFLX and the number of shares you want to buy, or the amount of money you are willing to invest.
6) Examine the performance of Netflix
Whether your stock portfolio is full of companies or contains only a handful of stocks, it is essential that you review the performance of each component regularly: monthly, quarterly or annually.
This gives you the opportunity to review performance and ask if any adjustments to your holdings are needed – to maintain the status quo, buy more shares or sell existing shares.
How to sell stocks
When you want to sell your holdings, log in to your investment platform, enter the stock symbol and select the amount you want to sell.
If you have made an overall profit, you will be liable for capital gains tax (CGT) when you sell your holdings. If you have owned the shareholders for less than 12 months, you will have to pay 100% of the value of your capital gain at your applicable income tax rate. Talk to your accountant.
However, if you have held the shares for more than 12 months, you may only have to pay 50% of the capital gain under Australia’s CGT discount rules.
How to invest in Netflix via a fund
Investing directly in individual stocks will hopefully be a profitable experience. It may also entitle you to shareholder benefits specific to the company in question.
It can also make you vulnerable to stock market volatility and unexpected stock price fluctuations. These days, even a solo tweet — let alone a full-fledged geopolitical dispute — can send shockwaves through the stock market.
That’s why many financial experts recommend that most people invest in a diverse mix of asset classes and funds that hold hundreds, if not thousands, of company stocks.
Being an important component of the Nasdaq index, Netflix is found in many “active” and “passive” funds (index tracker) incorporating a bias towards the United States.
Please note: investing in companies does not carry any guarantees. When buying shares of a company, it is possible to lose some, and very occasionally all, of your money. Past performance is no guarantee of future performance and this article is not intended as a recommendation of any kind.