Kevin SimpsonNetflix Inc.NFLXBUYDec 27, 2024

There are two big streaming companies, Netflix and YouTube. Netflix should be able to increase its subscriber growth by diversifying its business into sports, etc. There is an uptick on their paids. It does a lot of its own content and buys content very easily. You can buy at these levels.

He's a big fan (and a big fan of his son who's an actor ;). Transformed the way we looked at television, synonymous with streaming. But now so many other streamers in the market. Doesn't have the tech edge anymore, would have to reinvent itself.

They still have margin strength, still have 330 million subscribers and their ad-tier business will continue to accelerate. Also, their cash flow generation has been more positive. He gets it--slower engagement. But these positive drivers will accrete long-term.

He bought more, though it's a small position, because it traded down on a downgrade--but this was piling onto a stock that already had a tough time. He thinks for a trade, this will bounce. He though their last quarter was good, though the market didn't. With everybody so negative on Netflix, he thinks the bad news is already baked in.

He sold it last June, and NFLX is -17% since. He is bearish on all streamers, because they're getting challenged on margins, whereas the growth is in live entertainment and sports. But that is very experience to acquire. So, the streamers will continue to raise prices.

He's buying more shares. Investors worry NFLX is losing share to YouTube and TokTok, while Paramount and Warners will likely merge. But NFLX still has the largest user base in the world and they make the most money per engagement. This allows them to add more content than their peers. They still grow revenues and profits. Still likes it.

He sold it recently and bought it back. Thinks it's safe. Not sure about the upside, but the downside has been taken out. Other streamers are raising prices which makes NFLX a value player.

Proven pricing power. ROE has been solid. Earnings should be up this year ~40%. Now above 200-day MA; the rising 200-day should provide good support. RSI starting to improve. Use the 200-day as your stop. Investor made a good buy.

(Note the short timeframe.)  The market loved it for a while after the abandoned WBD deal. Then market started to focus on competition. But people aren't cancelling subscriptions; in fact, just the opposite. Trades at 20x 2027 PE for double-digit growth, terrific balance sheet. Boundless opportunities, sees so much upside.

The PE has fallen from 40x PE to 22.5X forward PE, so he's enthusiastic. They have a huge content problems, maybe bring in live programming. The stock is cheap now. 

200-day MA and stock price moving lower. Cashflow continues strong. Valuation's pretty cheap at 21x forward PE. 23-25% earnings growth rate. Still has value, so he's holding on. Still global streaming king. Story's not broken.

It will drift higher to the mid-80s by year end.

Was upgraded today. He added to it last week. It doesn't need a multiple expansion to recover. The PE is below 20x, cheap. It's about content, which has lagged and needs to improve. He thinks it will.

North American growth is slowing with its product saturated, though internationally it is growing nicely but it's lower margin. Also, it's seeing the classic transition from growth to value investors.. NFLX was a high-growth company at a high multiple, but has slowed down. It's a hold, because NFLX is a legitimate franchise, and the 20x PE is fair, though it likely will decline as growth investors exit. Also, movies and shows are a capital-intense business.

Its earnings and competition are dragging it down. Many people are getting tired of binge-watching. They aren't growing the business as fast as before after massive growth. It's the law of diminishing returns. Warners is up for sale, but carries a lot of debt--whoever buys them must absorb that debt. He won't own any streamers.