Stock price when the opinion was issued
Meets a lot of his criteria but one -- it's not actually a capital-light business. Spends a lot on developing new content. A compounder. Well, and frugally, run. Investors would do well to read about the culture and the CEO. Dominates the space, market leader. Quite a bit of direct competition.
If you got in at favourable prices, stick with it. Strong company. One of the biggest mistakes investors make is that they "interrupt compounding unnecessarily" (paraphrased from Charlie Munger).
Is the leader in streaming. But you have to be a little wary of film accounting--you put the cash out front, but accountants will amortize that cost over time. So, earnings don't really reflect the true cash impact on an expanding portfolio of new releases. For a long time, NFLX was challenged on a cost basis, nor producing free cash. This is past and are now producing free cash.
Did everything right, yet down today ~4%. Expectations have been set very high for the traditional growthy and earnings momentum names. If everybody owns the stock, what's your next move? Someone out there didn't like what they saw and hit the sell button, and then it's just investor psychology at work.
He wrote a covered call on half his position before the report. Sold to open the July 25th $1,245 strike for $57 or 130% annualized (1-week calls). Close this morning at the open for $12 and netted $45 profit. Loves it long term, hold forever.
They just reported. They grew revenues by 16%, slightly beating, revenue growth is driven by higher subscription prices, and operating margins beat slightly. Blockbuster releases included season 2 of Squid Games and the new Tyler Perry movie. They also gave great guidance for this quarter. But expectations were sky high, and audience engagement as up only 1% this year, disappointing the street, which thought future growth could slow. They sold off, because shares came into the quarter too hot. The conference call outlined exciting growth to come, including use of AI they just started to use in content. Remains best of breed in streaming.
A second driver of growth has been the new ad tier. After six months, this new tier has attracted nearly 5 millions subs worldwide and “more than doubled” since early this year. About one in four new sign-ups elected the cheaper ad version of Netflix. It’s still early days, but these figures are moving in the right direction. The street reacted last week with two upgrades, including one price target jumping to $535. That may be optimistic, but the consensus is that Netflix has more room to run. Read 3 Big Tech Stocks Making a Comeback for our full analysis.