Stock Spotlight: Netflix Inc (NASDAQ:NFLX)
This week's Stock Spotlight is NASDAQ-listed Netflix Inc.
About Netflix Inc.
Netflix, Inc. operates as a subscription streaming service and production company. The Company offers a wide variety of TV shows, movies, anime, and documentaries on internet-connected devices. Netflix serves customers worldwide.
Source: Bloomberg
Key Stats
Key Stats
Source: Yahoo Finance, Bloomberg. Data as of 02/08/24.
Price Performance
Growth Potential
- Very attractive TAM
- Significant existing user base, which is continuing to grow strongly, particularly in the international market.
- Competitive positioning globally, as a market leader not only in the industry but starting to carve a leading position against cable television.
- International expansion opportunities across emerging markets as well as solidified position in established markets (US).
- Exclusive contracts with the best producers including Sony Entertainment, Warner Bros and Universal Pictures.
- Growing demand for Netflix exclusives.
- Flexibility to pick up content driven away by TV to customise viewing according to user tastes and preferences.
Key Risks
- High valuation and trading multiples which are susceptible to de-rating should growth rates miss expectations.
- Escalation of intense competition and streaming wars, especially with Walt Disney (DIS) who own a strong content portfolio covering Disney, Pixar, Marvel, Star Wars, and National Geographic brands and sports streaming service ESPN+. DIS also holds a majority stake in Hulu, which is an online streaming service provider.
- Execution risks around content creation versus content distribution.
- Increasing competition based on price or exclusive content contracts.
- Investment into original content creation fails to live up to the success of exclusive contract deals of existing content.
- Bandwidth issues in emerging economies posing difficulties in penetrating these markets.
- The long-term and fixed cost nature of content commitments hinder NFLX’s operating flexibility.
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Disclaimer: This article does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.
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