Stock (Symbol) |
Netflix (NFLX) |
Stock Price |
$279 |
Sector |
| Technology |
Data is as of |
| February 19, 2018 |
Expected to Report |
| Apr 16 |
Company Description |
 Netflix, Inc. is a provider of Internet television network. The Company has over 57 million streaming members in over 50 countries. Its members can watch more than two billion hours of television (TV) shows and movies per month, including original series, documentaries and feature films on Internet-connected screen. The Company has three operating segments: Domestic streaming, International streaming and Domestic DVD. Source: Thomson Financial |
Sharek’s Take |
 Netflix (NFLX) just added 8 million new memberships last qtr, to take its total to 118,000 (I will be rounding in this research report, to keep it simple). That’s the most new members NFLX has ever added. A record high. The big picture is changing as well. Netflix is investing it’s money into overseas expansion, thus spending much of its would-be profits. The past three years NFLX made a profit margin of 33%, 36% and 37%s in the U.S. and -17%, -10% and 5% Internationally. So it was losing money overseas to be first to market — and it worked — as profits are now coming in! For several years I have been putting pen-to-paper to figure how much the company could earn with 200 million subscribers if International margins someday equaled those in the U.S. During the last three years paid subscribers have grown from 70 million to 90 million to 110 million. We need to assume a higher target than $200 million subscribers long-term. In the example below I use a hypothetical $125 per year subscription price on a potential 200 million subscribers:
$25 billion, Annual Revenue Again, that’s 200 million subs, and NFLX only has 110 now, so Wall Street is pricing in a higher potential further down the road. Does this company have potential for 500 million subscribers ten years from now? I don’t have a clue. But Netflix is able to (1) keep gaining customers and (2) raise prices while not lose customers . And the company is a master at developing its own content, so it doesn’t have to constantly pay other movie studios every time you watch one of their flicks. Netflix stock is tough to value, and I feel it should be traded on a technical basis where you buy low, sell some high and hold the rest for the long-term. |
One Year Chart |
 Triple-digit profit growers often are the Superstar stocks of their time. Yet many investors don’t own ’em because they are perceived as being “too high”. NFLX has missed estimates by one to three cents the last three qtrs, which is odd for a All-Time winner in its prime. Profit estimates are flying higher, with 2018’s going from $1.91 to $2.01, $2.26 and $2.71 the last 4 qtrs. Qtrly profit Estimates have increased three straight qtrs and now NFLX is expected to grow 60%, 333%, 148% and 78% the next 4 qtrs. The Est. LTG of 81% is stellar. |
Fair Value |
 With profits really starting to take off it’s really blue skies ahead. NFLX is a stud stock because we don’t know what NFLX will earn 3-5 years from now, and I think as long as estimates keep climbing this stock will be hot. You can’t asume 100x earnings is too much when profits could hit $10 in the years to come. |
Bottom Line |
 Netflix is WAY too high on the ten-year chart. This stock’s gone parabolic, and I wouldn’t be a buyer at these levels. I wouldn’t be a seller either as I’ve sold on the way up and wish I hadn’t. With triple-digit growth, a strong franchise name, and growth opportunity worldwide, Netflix is the perfect Internet stock. NFLX ranks 17th in the Growth Portfolio Power Rankings. I don’t have it in the Aggressive Growth Portfolio, but I wish I did. |
Power Rankings |
Growth Stock Portfolio
17 of 39Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
