Opinions
Jim Cramer - Mad Money
Netflix Inc.
NFLX-Q
BUY
Apr 22, 2024
Stock price when the opinion was issued
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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.
Leader in the streaming market. Content library continues to grow, with local content in different countries, and that's supporting rapid international growth. Revenue for fiscal 2026 expected to exceed $50B USD, driven by global expansion. Ad-supported tier has been very successful, as has password-sharing crackdown. Strong financial performance, with revenues accelerating and margins expanding.
40x forward PE, but 27-30% expected growth rate. Tech company, but great valuation. No dividend.
Last Friday, shares sank 9% after they reported. Their Q1 looked good to him, though, with a huge subscriber beat (adding 9.33 million paid users) and revenue jumped 15% YOY. $2.14 billion cash flow was impressive, and the company offered great guidance for the next quarter. That said, the full-year revenue growth forecast seemed lacking, slightly below expectations, and management didn't raise its full-year free cash flow forecast. This suggests things will be worse in the second half of 2024. Also, they're getting hit by currency fluctuations, like the collapse of Argentina's peso. But starting next year, Netflix won't supply numbers about membership and average revenue per member, which really spooked the market and triggered the sell-off. He agrees that they revenues mean more now with the company, but it was a boneheaded move to hide this data. Overall, he's more bullish than bearish about Netflix. Memberships are up and their ad business is growing.