| Stock (Symbol) | Stock Price | |
Netflix (NFLX) |
$207 |
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| Data is as of | Expected to Report | Sector |
August 22, 2011 |
Oct 25 |
Retail & Restaurant |
| Sharek’s Take | ||
 I will purchase Netflix (NFLX) today for the Growth Portfolio and Aggressive Growth Portfolio. NFLX has been a top growth stock since 2010, but has given investors few opportunities to get in at a reasonable price.NFLX is having a price hike which will probably result in a small loss of customers and a rise in profitability.
I wrote more about this on in Bad Netflix News is Good to See. Netflix is expanding its business overseas, and this will be a huge catalyst for growth the next 3-5 years. We here in America are familiar with Netflix. The company is the premier leader in ah-home DVDs and streaming video. The technology is already there. The company already has a plethora of movies in its arsenal. The only thing management has to do is obtain local shows and movies from individual countries to appeal to viewers in the respective countries. |
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| One-Year Chart | ||
 Netflix has the numbers of a stock market leader. Quarterly profit growth has been great the last four quarters (bottom left) and 43% growth is expected the next two quarters (bottom right). NFLX is neither too expensive or on sale — its priced right. Last quarter NFLX had a P/E of 58, now its 44. After peaking over $300 last month, NFLX has lost a third of its value. I am taking the opportunity to get in. |
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| Earnings Table | ||
 Netflix popped out 58% profit growth last quarter on a 52% increase in sales. Yes, 52% increase in sales.
The company crushed earnings estimates last quarter, but I can’t let that guide me about future quarters. There’s uncertainty because of the price increase, and I think that’s one of the reasons the stock is down like it is.Annual Profit Estimates have increased in each of the last four quarters. NFLX is expected to make almost $10 in 2013. With the stock around $200 now, that means this stock is trading for around 20 times future earnings. My thought is If we buy the stock now and the company makes around what is expected while the stock stays around this price, then we’d be holding NFLX with a P/E of only 20 (approximately). That’s a good deal. Quarterly estimates declined next quarter because customers could quit or reduce their service with the price increase taking affect. Quarterly growth looks good but will likely be volatile. |
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| Fair Value | ||
 NFLX is selling a around its 2011 Fair Value right now. Upside for investors looking to hold the stock through 2012 is 50%. NFLX isn’t cheap, but it possesses solid prospects. |
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| Ten-Year Chart | ||
 The parabolic run in NFLX started in 2010. The stock closed 2009 at $55 and was $176 a year later. This year the stock continued higher, peaked at $305 just last month. Annual EPS Growth (right) has been exceptional. |
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| Power Ranking | Bottom Line | |
Growth Portfolio
6 of 19 |
Last week I sold two stocks in the Growth Portfolio to make room for top stocks that I didn’t yet own. NFLX is one of them, and I’m thankful for the opportunity to get the stock at this price. I’ve been watching this stock for a while, waiting for a good entry point. NFLX is ranked 6th in the 19 stock Growth Portfolio Power Rankings.
NFLX will replace Weight Watchers (WTW) in the Aggressive Growth Portfolio and be ranked 6th out of 11 stocks. WTW is looking like a 15% grower at 15 times earnings. NFLX a 43% grower at 44 times earnings. Higher profit growth trumps lower P/E in a standoff like this. |
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Aggressive Growth Portfolio
6 of 11 |
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