Kevin Simpson Netflix Inc. NFLX-Q BUY Dec 27, 2024

Big numbers last night. Challenge with the streamers is that you're only as good as your last hit. Viewership is quite fickle, very hard to keep attention captured over time. Forward PE ~40x, very rich. 

They delivered a blowout Q4: a big revenue beat and EPS, up 102%, strong margins despite expensive shows. cash flow of $1.38 billion, revenue 16% YOY, and 18.91 million new subscribers vs. the expected 10 million. However, guidance was mixed, with the forecast in the current quarter below expectations, but they slightly raised full-year 2025 in revenue and operating margin. They're running circles around the competition. Their hits: Squid Game 2, Carry-On, and NFL on Christmas Day. Their ad-supported tier accounted for 55% of sign-ups in Q4. This has more momentum than he's ever seen.

They plan to buy Formula One's TV rights, and they are in the best position to leverage more than anybody else buying such rights. Hopes it happens. Flawless execution.

It's now a momentum story, but now very expensive. A great company. He bought a lot of shares during the sell-off a few years ago when competitors like Prime launched. There are better opportunities in gen AI. They've done a great job in live programming (sports).

Clearly winning the streaming wars, being pulled upward by increasing number of global subscribers. That's driving pricing power. New ad-supported tier, password-sharing crackdown. Investing in original content. Live sports are generating revenue. No dividend.

Increasing cashflow. Sees 23% earnings growth. Shares are down ~15%.

(Note the short timeframe.)  Until the last couple of weeks, the media sector has held up extremely well. Perhaps investors are thinking this area is not as impacted by tariffs. Correction Feb/March, but already bouncing back.

He and Lang suggests consumer-oriented stocks with a subscription base that work even in a slowdown: Netflix, Roku and Spotify. Last January, NFLX reported a super quarter, then shares gapped up, but rolled over mid-February with the market. Lang says that was a reset. Shares have been rebounding ever since, now 9% this year. NFLX has resistance at $1,000, but if it breaks that, Lang thinks it can reach $1,250. A momentum indicator--MACD--recently made a bullish crossover. Meanwhile, the Chaikin Money Flow (CMF) is slightly bullish; big buyers are still buying. RSI is starting to bounce after hitting oversold earlier this month, now around 50, so there's a ways to go before being overbought.

Their edge is their content library. Doesn't pay a dividend, so be disciplined: if you double your money, sell half. Any business news will punish shares. 

The chart shows a head and shoulders formation. It's a great, worldwide company that's done many things right. Is up only 5% this year. He likes subscription models.