Stock Review : Netflix ($NFLX)

Francis Kway

Stock Reviews: Netflix $NFLX

This streaming giant has become a household name, revolutionizing the way we consume entertainment. Founded in 1997 by Reed Hastings and Marc Randolph, Netflix started as a humble DVD-by-mail service.

But as technology evolved, so did Netflix. The company pivoted to streaming in 2007, and the rest, as they say, is history. With a vast library of movies, TV shows, and original content, Netflix has something for everyone.

From gripping dramas like “Stranger Things” and “The Crown” to laugh-out-loud comedies like “Grace and Frankie” and “Schitt’s Creek,” Netflix has mastered the art of captivating audiences. But Netflix is more than just a content provider – it’s a cultural phenomenon.

The company has changed the way we talk about and consume media, with “binge-watching” becoming a common phrase and “Netflix and chill” taking on a whole new meaning. As Netflix continues to expand globally and invest in original programming, one thing is clear: the future of entertainment is streaming, and Netflix is leading the charge. 📺🍿

The Lowdown

 

Rating: Buy 💰 Star Rating: ⭐⭐⭐⭐ (4 out of 5)

 

Key Facts

 

  • Market Cap: $251.50 billion
  • Industry: Entertainment
  • Recent Stock Price: $577.75
  • 52-Week Range: $169.25 – $580.67

 

What’s Hot 🔥

 

  • Impressive Q1 2024 results, with revenue growth of 15% YoY and EPS growth of 83% YoY.
  • Strong membership additions, with global streaming paid net adds of 9.33 million in Q1 2024.
  • Robust operating margins of 28.1% and free cash flow generation of $2.14 billion in Q1 2024.
  • Upbeat guidance for FY24, with revenue growth expected to be 13-15% and operating margins projected at 25%.
  • Significant growth opportunities through the WWE deal, particularly in expanding the advertising business and acquiring more subscribers.

 

What’s Not ❄️

 

  • Decision to stop reporting quarterly membership numbers and Average Revenue per Member (ARM) metrics from Q1 2025, causing concerns among investors.
  • Potential slowdown in subscriber growth as the streaming market matures and competition intensifies.
  • High content costs and production delays due to the ongoing SAG/WGA strikes.
  • Uncertainty around the success of new ventures, such as live sports programming and the advertising business.
  • Premium valuation relative to peers, leaving less room for multiple expansion in the near term.

 

The Tea 🍵

 

Netflix’s Q1 2024 earnings report was a resounding success, demonstrating the company’s continued dominance in the streaming space. The strong financial performance, robust membership additions, and upbeat guidance for the full year underscore Netflix’s ability to deliver profitable growth even as the market matures.

While the decision to stop reporting quarterly membership numbers and ARM metrics has caused some concern among investors, the rationale behind the move makes sense. As Netflix evolves its pricing and membership tiers, the focus should shift towards engagement, content quality, and overall financial performance.

The entertainment industry is undergoing a significant transformation, driven by several key trends:

  1. Shift to streaming: Consumers are increasingly embracing streaming services as their primary source of entertainment, leading to a decline in traditional cable and satellite subscriptions.
  2. Original content: Streaming platforms are investing heavily in original programming to differentiate themselves and attract subscribers.
  3. Global expansion: As internet access and smartphone penetration increase worldwide, streaming services have the opportunity to tap into new markets and grow their subscriber base.
  4. Advertising potential: The introduction of ad-supported tiers opens up new revenue streams for streaming platforms, as advertisers seek to reach cord-cutters and younger audiences.

Investors should consider allocating to the streaming sector as part of a diversified portfolio, taking advantage of the long-term growth potential. However, it’s crucial to be mindful of the risks, such as intensifying competition, high content costs, and the potential for regulatory scrutiny.

Timing investments in the streaming space requires a balanced approach, considering factors like valuation, company-specific fundamentals, and overall market sentiment. Investors should focus on companies with strong content libraries, global reach, and a proven ability to generate profitable growth.

 

YOLO or No-Go? 💸

 

For investors who believe in the long-term potential of streaming and Netflix’s ability to maintain its leadership position, the recent pullback in the stock price presents an attractive entry point. While near-term volatility may persist, Netflix’s strong fundamentals, robust cash flow generation, and significant growth opportunities make it a compelling investment for the long haul. The WWE deal, in particular, could be a game-changer, providing a boost to both subscriber growth and advertising revenue. As always, investors should conduct their own due diligence and consider their risk tolerance before making any investment decisions. But for those ready to ride the streaming wave, Netflix might just be the ticket to binge-worthy returns. 🎥💰





Discover more from Cheat Code

Subscribe to get the latest posts to your email.

Share This Article
Leave a comment

Discover more from Cheat Code

Subscribe now to keep reading and get access to the full archive.

Continue reading