| Stock (Symbol) | Stock Price | |
Netflix (NFLX) |
$91 |
|
| Data is as of | Expected to Report | Sector |
November 7, 2011 |
Jan 23 |
Retail & Restaurant |
| Sharek’s Take | ||
 Netflix (NFLX) has taken tons of heat in the media lately, but I’m seeing this glass half full rather than half empty. NFLX raised prices by 60% last quarter, and lost around 2% of its paid subscribers. Additionally, International subscribers have gone from zero to 1 million in the last year. This is still one of the worlds fastest growing companies.The real problem is Netflix will have to spend money to expand quickly overseas — to be the first to market. Therefore, NFLX will likely lose money in the first six months of next year and it expands into England and Ireland. I agree with this decision to put long-term growth ahead of short-term profits. Netflix’s business overseas will all be via the Internet, so there’s no mailing out DVDs to worry about. This is a cleaner business model. Another good thing is the fears of competition should subside as Apple and Amazon aren’t focusing in on competing against Netflix — they are coming to market in different ways (like a set-price per video download instead of Netflix’s monthly subscription model). |
||
| One-Year Chart | ||
 I missed NFLX on the way up, then bought in at $207 after the stock bounced off support. Then the bottom fell out and we are sitting at $91. I wish to double my position in this stock, but want to wait for a bottom and don’t know if the stock will race higher next year because 2012 estimates just fell from $6.88 to $1.44. Also notice Estimates show negative growth next quarter and no profits 2QtrsOut. |
||
| Earnings Table | ||
 Netflix sales rose 49% last quarter and profits jumped 66%. For more details of the numbers see my Netflix (NFLX) 2011 Q3 Quick Take.NFLX beat the street by 16 cents but the news was offset by lowering of estimates for next year. Annual Profit Estimates got slashed for 2012 and 2013. I’m staying positive on the stock because I feel the company is planting seeds today that should turn into a profitable down the road. For instance, the company has 23 million subscribers here in the US. Now that its expanding all over the world, how many more subscribers can it get? Maybe another 23 million? NFLX would have made around 5 bucks a share this year, so does that mean it could make 10 bucks if it doubles its subscribers? How big is the market worldwide? Could it be 1000 million? I feel this company can make $10 a share, and 20 to 30 times earnings would put the stock between $200 and $300. Quarterly estimates look bad because the company is taking money to build its business, this will hurt profits. |
||
| Fair Value | ||
 NFLX’s P/E is high because 2012 profit estimates went from $6.88 to $1.44. If we look out to 2013 the stock has solid upside. |
||
| 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. |
||
| Power Ranking | Bottom Line | |
Growth Portfolio
12 of 21 |
Netflix is growing in a good way. This company spends tons of cash for movie deals and exclusive TV shows. Customers are mad, but how many people hate their cable companies? The great unknown here is how much will it cost to expand worldwide and what will the company eventually make in profits when its said and done. NFLX is getting investors support here around $90. Its been acting well even when the market hasn’t. I sense the stock momentum has turned higher. NFLX is ranked 12th in the 21 stock Growth Portfolio Power Rankings and 9th of 12 in the Aggressive Growth Portfolio Power Rankings. |
|
Aggressive Growth Portfolio
9 of 12 |
||
