Netflix (NASDAQ: NFLX) has been the worst-performing FAANG stock since the beginning of 2021. The global leader in streaming guided ​​for 2.5 million new paid subscribers for the first-quarter, which was 1.5 million fewer than Q1 2021. With the sudden loss of $60 billion in Netflix's market cap, the market is underestimating the company's growth potential, giving investors a buying opportunity for this FAANG laggard.

You can't put the toothpaste back in the tube

Streaming is not going away. As the first mover, Netflix has more data and experience than its competitors like Amazon Prime, Disney+, and HBO Max. For example, the Netflix Recommendation Engine, its proprietary algorithm, which the company says helps it save an estimated $1 billion per year by keeping subscribers happy and willing to stick around. And Netflix remains the most popular streaming service with 222 million subscribers worldwide.

But more importantly, subscribers love Netflix. Its product is addictive: On average, subscribers watch Netflix for 3.2 hours per day. Additionally, Netflix series accounted for six out of the 10 most searched shows globally in 2021.

Image source: Getty Images.

Future growth

How much more can the streaming giant grow? As Netflix's subscriber growth slows in the U.S. and Canada, international markets become the company's greatest opportunity. The company is planning original content in "all corners of the globe" as it aims to eventually reach 800 million to 900 million households, or about 300% growth. In a first, Squid Game, an international show, was Netflix's biggest hit in 2021, and it's unlikely to be the last. Notably, roughly 60% of Netflix's revenue comes from outside of the U.S., and the company continues to invest in original content for those audiences.

Additionally, the top streaming service has pricing power. Netflix recently announced plans to raise monthly prices in the U.S. and Canada by at least $1. And with a churn rate at 2.4% -- the lowest among all of its competitors -- it's unlikely the price hike will disenchant loyal subscribers.

Yet, the most exciting avenue for growth could be gaming. With its popular original content like Stranger Things and Squid Game, Netflix believes it has only scratched the surface on its capabilities. The mobile gaming division is still in its infancy, but CEO Reed Hastings aims to be a global leader in the industry, and "not just be in it for the sake of being in it or for a press release."

What could go wrong?

Netflix may have started the streaming trend, but it now faces fierce competition. Between all of Disney's (NYSE: DIS) streaming options (Disney+, Hulu, and ESPN+), that entertainment giant added an estimated 50 million subscribers in 2021. Meanwhile, Netflix added only 22 million net paid subscribers -- its slowest subscriber growth since 2015. Reaching Netflix's lofty long-term subscriber goals will take some time. Hastings even admitted to being "frustrated" by the company's current slower growth.

Also, producing original content isn't cheap, especially when you operate in as many countries as Netflix and lack the intellectual property of even its less threatening competitors like Peacock and Paramont+. Netflix spent an estimated $17 billion on content in 2021.

But in its latest quarterly report, management announced expectations for the company to be free cash flow-positive for the full year 2022 and beyond, meaning it shouldn't need to increase its debt. Considering that Netflix has over $15.3 billion in gross debt already, generating positive cash could change the company's trajectory. Once it's free cash flow-positive, Netflix expects to pay down debt, explore acquisitions, and return value to shareholders via stock repurchases.

The Foolish takeaway

Don't be alarmed by Netflix's stock's latest sell-off. Even with growing competition, the company remains the top dog in streaming, a trend that is accelerating worldwide. With its first-mover advantage, Netflix knows what its subscribers want in their content. And it has a chance to expand its dominance into emerging markets and even other sectors like gaming.

Still, streaming service investors should continue to monitor Netflix's most important metric: subscriber growth, particularly in international markets in the coming quarters. If that number remains robust, alongside positive gaming developments, Netflix could soon be back to its historical position: a top FAANG stock.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Collin Brantmeyer owns Amazon, Netflix, and Walt Disney. The Motley Fool owns and recommends Amazon, Netflix, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.