At HousewifeTrading, we decided to buy the stock Netflix Inc. Below you will find an analysis to justify our decision. Happy to get some feedback in the comment section.
We love the product
Netflix is a fantastic product, the monthly subscription is very affordable, the quality of the series and choice are solid. We use it since more than 2 years and never faced any issues.
Netflix is a profitable company
Lots of tech companies went IPO over the last couple of years. Some of them are still, after couple of years unprofitable and surviving on VC money. It’s not the case for Netflix Inc. The net profit margin is 2.11%. It means that out of 8.8B USD revenue, there was still 186M USD on the bank account after paying for all the costs, including tax. Not bad for a company that is profitable since 2012 and which is still growing 30% year over year. Looking at the actual trends, it could even be stronger for the whole 2017 exercise.
Netflix Inc. is having a current ratio above 1, meaning that the sum of its asset is higher than the sum of its debt. Good news.
Netflix Inc. invests a lot in new content and innovates
Netflix Inc. says it will invest 8BUSD in content for next year and it’s 2BUSD more than this year. At the same time, Netflix Inc. also worked hard to solve one of their biggest issue : watching offline. It’s finally possible. Last but not least, Netflix Inc. invests a lot in big data in order to detect early which series are performing the best.
Netflix Inc. investor relation section is very transparent
Netflix Inc. investor relation page is very, very transparent, you can see quarterly, yearly data in multiple form and with high level of granularity.
Financial crisis would not have strong impact on the demand of Netflix Inc.
Even if the stock price could vary, we would not expect a strong decline in subscription in case of a financial crisis. Financial crisis, generally gets people to stay home, travel less. Still even during a crisis, people will fall back on cheap entertainment. Going to the movies for 4 people will cost 40USD + popcorn. Buying a 10USD subscription for unlimited movies and series at home, guarantees a higher entertainment for much cheaper price.
Still be careful of potential items to be careful about
Netflix Inc. has a very high price earning ration. Meaning that the price of the stock is 195x higher than the earning per share. High price to earning ration means that the market is expecting growth from the stock.
Netflix Inc. needs to be careful when increasing prices as illegal streaming is still a good option for those who want to save the subscription price but agree to be exposed to a massive amount of advertising.
HousewifeTrading bought Netflix at 195USD in October 2017.
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