Netflix Inc. (NFLX)

Once again, a name that's shooting out terrific results. Yet the market's focused on one thing -- is it going to get WBD? No one knows. All he knows is that it reported 13% revenue growth last quarter, and guided for near 20% profit growth going forward. Adding new programming all the time and new subscribers. Pricing power. 

Not worried about how much $$ to be spent if it gets WBD, because they'd be paying a pauper's price for an amazing quality business with some of the best IP. At 20x PE for one of the world's best companies, you'd be silly not to buy it here. No dividend.

He actually likes the Warner Bros. deal to acquire the best movie studio in the world.

No company has pivoted more successfully than Netflix. Are pivoting now, wanting to buy Warner Bros. for its content--he's not sure about it. The organic business is still growing, but the big question is what will happen to Warners? If they buy it at full price, it will give them great content, but not growth.  At 30x PE, it's a full multiple.

Dominant business. Starting a really nice ad business, which has very high margins. The all-cash offer for WBD will drain a lot from the balance sheet. How is it going to pay for the potential acquisition? How will that affect earnings and cashflow? A takeover will also take time to work through.

Doesn't own, but starting to look at it. Waiting for dust to settle on valuation and acquisition synergies -- at least 1-2 years.

Big battle right now is focused on content. Earnings came out a bit weaker because subscriber growth has started to slow down. Lots of competition out there. Growth will come not only from movies, but also from live events such as sports. Stock's down 8% YTD, but still trades at a hefty valuation ~33x PE.

He'd certainly wait to see if it can sustain earnings growth, as that's the challenge.

Netflix has a YouTube problem--they have to compete with original content. That's why YouTube unseated them, because audience appetite is for original content.

He sold half his position. (Shares are at a 52-week low.) He should have sold when NFLX offered to take over Warners. He still likes it long term. No, he isn't happy they want to buy Warners--why do they need it? They could spend that money by investing in 5 years of content.

It reports Tuesday. He expects to hear why NFLX wants to pay a fortune for Warner Bros.

He hopes they don't buy Warner Bros., a very unpopular deal in Hollywood and will take Netflix's eye off the ball. He doesn't see the value in Warners. Also, the stock isn't cheap.

Continues to dominate. Potential acquisition of Warner Bros. would make it even bigger. Market's concerned about how much it's spending on the deal. But it's all about content, which brings on more viewers and subscribers. Could find support at $80-81. Likes the long-range view.

Not concerned about valuation at 29x PE, cheaper than WMT or COST. Still very strong earnings growth of 20-25%.

Paramount needs the Warner Bros. deal more than NFLX does. Family trust has now been taken out, with Ellison backing the whole thing, so the story becomes more difficult for Warner. From a regulatory view, this would put Paramount in charge of an awful lot of media.

As for NFLX itself, this is the first time it's really bought something; has been homegrown up till now. If they can get this asset, it'll have a much broader and deeper catalogue, as that's what it spends a lot of its money on. Good deal if they can get it. Hollywood hates NFLX, but the reality is that streaming is where movies are going. Hollywood's dying a slow death. 

Multiple's only about 28x, whereas it was previously 100x. If they walk away from the deal, stock will go up. If they do the deal, it'll be great for them in the long run. Great time to be buying. You don't lose too much by dipping in at these levels. May up their bid, and that would hurt the stock a bit. The NFLX bid seems to be Warner Bros' preferred one.

A decent, but expensive company, trading around the 30x PE, cheaper than before they announced the Warners deal. Problem is they need to spend a lot on content and continue to. He regrets not buying it in 2022 when it traded at 16x PE. Are not better opportunities in tech. He respects the founder deeply though. 

Paramount's bid for WBD is partially financed by the fifth-wealthiest person in the world, Larry Ellison (Oracle), but Netflix wants WBD and has the blessing of the WBD board. Paramount won't get WBD unless Ellison comes back with HUGE money. WBD is up 20% in December.

NFLX has emerged as essentially the clear winner in the streaming space. A few years ago, this statement was not as clear, as competitors like DIS, AMZN, were potential peers to NFLX in the space, but it is now clear that NFLX has a strong moat around its platform. Sales and earnings growth are expected to trend higher, analyst estimates are rising, and margins are expanding. It generates strong free cash flow and mostly repurchases shares with its cash flows. It trades at a reasonable valuation of 31X forward earnings. We feel that in a consumer slowdown scenario, cutting streaming platforms is one of the first places that consumers look at, and this is one of the biggest risks for the name, but over a long period of time, we think this name has a lot of potential. 

With the WBD bros deal we think NFLX becomes a powerhouse in the streaming space, without the WBD deal, we think it can continue to do well, but it will need to refocus on organic growth and balance sheet strength. Short-term the stock may fluctuate if the deal goes through, but we think it is positive for the stock long-term.
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