Can Netflix Hold the 20pt Move?

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I don't think it goes to 160 unless S&P significantly weakens. NFLX reported strong subscriber growth.

I don't trade stocks so I don't follow them but in regards to your "strong subscriber growth" comment... I've read that all their money goes into shows/programs and that they won't be cash flow positive (or was it about profitability) for years to come! Some food for thought...

It may rally, who knows, but do people pay attention to details? How about competitors? Are they going to watch or they will adjust their offer accordingly?

Similar things with other companies. For example look at Apple, it is making shit load of cash every year, yet everyone is focused more on Amazon and the likes that are little to no cash flow
positive for years (from what I read)

 

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I don't trade stocks so I don't follow them but in regards to your "strong subscriber growth" comment... I've read that all their money goes into shows/programs and that they won't be cash flow positive (or was it about profitability) for years to come! Some food for thought...

yet everyone is focused more on Amazon and the likes that are little to no cash flow
positive for years (from what I read)

So you gave your own counter-example. I agree with you. Although Amazon is an almost 500B company and NFLX is still around an 80B company. So I think it has room to grow. NFLX is not a value stock and if the S&P has a 2-3% down day, that stock will drop like a rock like others in FANG.

 

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So you gave your own counter-example. I agree with you. Although Amazon is an almost 500B company and NFLX is still around an 80B company. So I think it has room to grow. NFLX is not a value stock and if the S&P has a 2-3% down day, that stock will drop like a rock like others in FANG.

I don't understand, what "counter-example" would that be?

And what does stock's market cap vs other have to do with "room to grow"?

 

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I don't understand, what "counter-example" would that be?

And what does stock's market cap vs other have to do with "room to grow"?

You claimed that NFLX doesn't make a lot of money because it dumps all it's revenue into shows / content. However, you also correctly stated that Amazon does the same thing. So there's a counter-example of a company that remain barely profitable for decades because there's enough investors that only care about earnings growth. Tesla would be another example. I don't see any reason why NFLX can't do the same. I just mentioned market cap because NFLX is still small relative to other media companies. Amazon wasn't the best comparison, but could it become the size of Comcast? Sure, why not?

 

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I see your point, but I disagree. When you quoted me you took part of it out of the context which was "look at Apple, it is making shit load of cash every year". Of course I meant that it is hugely profitable company. Now google "amazon profitability" and you will see yourself that it is kind of funny nowadays that the company has almost no net profits yet the shares skyrocket. With all fairness to Amazon though, they have tons of revenue from profitable businesses and they invest heavily into new and diversified businesses.

But when it comes to Netflix you need to consider that this is just one type of business and they either attract customers (growth) by low prices or costly programming, either way posting no profits. Should they decide to be profitable (and that's the goal of any business unless I'm missing something here) they would either have to raise prices or spend less which bears serious consequences. Add to that competitors that will react accordingly. So if you're not profitable now, don't expect to be profitable for years, then what the hell are we talking about?

Tesla is a wrong example. It's a cult stock and no more. The valuation of that company makes no sense at all. Any company currently on the market can bring the same product they plan to do. Just put in electric motor (which is a no-brainer to produce, unlike combustion engine) and the battery. Yes, the battery is a problem, but it is a problem for everyone and once solved it will be solved for everyone too. But competitors (at least some of them) have something that Tesla doesn't have, which is knowledge through years of continued R&D. Manufacturers like Mercedes, BMW, Audi bring tons of new features all the time and that's why we have the kind of cars today and not what we had 30 years ago. The car is more than a motor alone. This why when you read that Volvo plans to be making EV only cars in a few years, it's not the "oil" that should worry the most but folks that buy Tesla shares, as Tesla doesn't have anything that other majors don't have, yet they have a lot that Tesla doesn't.

 

[ET180]

I see your point, but I disagree. When you quoted me you took part of it out of the context which was "look at Apple, it is making shit load of cash every year". Of course I meant that it is hugely profitable company. Now google "amazon profitability" and you will see yourself that it is kind of funny nowadays that the company has almost no net profits yet the shares skyrocket. With all fairness to Amazon though, they have tons of revenue from profitable businesses and they invest heavily into new and diversified businesses.

But when it comes to Netflix you need to consider that this is just one type of business and they either attract customers (growth) by low prices or costly programming, either way posting no profits. Should they decide to be profitable (and that's the goal of any business unless I'm missing something here) they would either have to raise prices or spend less which bears serious consequences. Add to that competitors that will react accordingly. So if you're not profitable now, don't expect to be profitable for years, then what the hell are we talking about?

Tesla is a wrong example. It's a cult stock and no more. The valuation of that company makes no sense at all. Any company currently on the market can bring the same product they plan to do. Just put in electric motor (which is a no-brainer to produce, unlike combustion engine) and the battery. Yes, the battery is a problem, but it is a problem for everyone and once solved it will be solved for everyone too. But competitors (at least some of them) have something that Tesla doesn't have, which is knowledge through years of continued R&D. Manufacturers like Mercedes, BMW, Audi bring tons of new features all the time and that's why we have the kind of cars today and not what we had 30 years ago. The car is more than a motor alone. This why when you read that Volvo plans to be making EV only cars in a few years, it's not the "oil" that should worry the most but folks that buy Tesla shares, as Tesla doesn't have anything that other majors don't have, yet they have a lot that Tesla doesn't.

I didn't mean to take what you said out of context. Maybe I misunderstood. However, I'm willing to submit that Apple is in a totally different category than Netflix. Based on Apple's P/E ratio, I would argue that Apple is more of a value company than a growth company since investors are not willing to pay an above average S&P P/E valuation for their future earnings expectations. Sure, Apple is hugely profitable. If it wasn't the P/E would be even lower. With Amazon on the other hand, investors are willing to pay a premium far above the S&P 500 in the expectation that their valuation will eventually come in line with higher earnings in the future. This is the basic growth vs. value philosophy.

I disagree about Tesla. I don't see Tesla as being that much different than an Amazon in regards to what investors are expecting. I do agree with you that I think it's over-valued. But I also think Amazon is over-valued although not nearly as much as Tesla. Can either company stay over-valued for a long time? Sure. Tesla has been overvalued (in my opinion) for at least half a decade. I agree with you that any company can bring basically the same product that Tesla has to market (although Tesla probably has some special IP in some areas, I don't see anything that will give it an amazing advantage). However, the same can be said of Amazon. Few products can only be bought on Amazon. And many products are not available on Amazon. But it comes down to what investors think. Many investors are pricing in the end of the internal combustion engine in 5 years. There are many that think Tesla has it all figured out and Elon is so smart (he's been tweeting about hyperloop, population collapse, and that we're all living in a simulation...wow, so brilliant, what an intellectual) and basically we'll all be driving Teslas by then because no other auto company will be able to make a competitive product. A large set of people expect that Amazon will kill all retail and will be the last man standing. Both groups of people (probably the same people in many cases) invest accordingly thinking that future earnings will be much greater than they are today and that the rest of the world just hasn't caught on yet like they have.

Side note, I really like EVs. I see the electric motor as being superior to the ICE in pretty much every way -- power to weight, torque profile, efficiency, maintenance, audio (although ICEs sound better under full throttle). It's just that the battery really sucks. A model S weighs 4,960 lb (more than most mid-size SUVs) according to Wikipedia. Over half a ton of that is due to the weight of the battery. Lithium ion batteries have been around for a long time. They are used everywhere. There's been lots of market pressure and research to make them more efficient. If it was possible and somewhat cost efficient, I suspect that it would have already been done.