5 ms·

Netflix is now a mature business that stopped growing. https://app.finclout.io/t/NBbmd0A https://app.finclout.io/t/NBbmd0A

glenjamin 5y ago
The graph in your link appears to show an operating profit of over $6 billion. What has gone wrong with our world that making a 6 billion dollar a year profit is considered a problem?
- KptMarchewa 5y ago
  Nothing wrong with valuing that business at ~100 billion too.
- vmception 5y ago
  Nothing, theyre just Attempting to price the shares correctly now. Its $6bn in profit still at a $96bn valuation. Down from $150bn. Quite high if only looking at profit. But I definitely like the revenues under the idea they can reduce overhead
  - jsemrau 5y ago
    I suppose the assumption of many investors is that competition is increasing and with that profitability will decline as well. Still the markets are crazy right now.
    - vmception 5y ago
      the moment earnings dropped, yes. by now its just people getting stopped out, cutting losses, shorts and put buyers piling on. there is that idea of a death spiral where Netflix has to spend even more on content and licensing again while raising prices for users and pissing users off more, but that model was resilient for cable - although cable does not command such revenue multiples from traders. I can see the business being fine, definitely watching for lower prices. netflix has always been a fun casino, super leveraged rocket.
      - jsemrau 5y ago
        I think Netflix has taken the right strategy by diversifying into more international content (Better Than Us, Squid Games, Alice) Expand to casual games and interactive content. As a consumer, the company will still provide real economic value
- jsemrau 5y ago
  Facebook also still makes insane profits each year. And the stocks drop like hell. There is a lot of uncertainty in the market with many smaller growth stock of the Russel 2000 being completely oversold. https://www.reuters.com/business/finance/us-small-cap-stocks-may-be-signalling-market-bottom-2022-01-26/ https://www.reuters.com/business/finance/us-small-cap-stocks...
- wirefall 5y ago
  Infinite growth is now the norm.
- lotsofpulp 5y ago
  > What has gone wrong with our world that making a 6 billion dollar a year profit is considered a problem? It is not considered a problem by anyone other than those who were invested in Netflix equity and expected it to be at a higher price.
- onion2k 5y ago
  What has gone wrong with our world that making a 6 billion dollar a year profit is considered a problem? Because it is a problem. Firstly, it's a problem because stock prices are a measure of predicted future value. The profit today is mostly irrelevant. In order to make a profit on shares the business has to be in a position to do better in the future. If it doesn't then people won't believe it'll do better even farther in to the future, so they won't bid more for the shares than they're worth today. That means investors can't make a profit. If you bought Netflix shares in the past you'll lose money. That's a problem. Secondly, and in my opinion more importantly, Netflix (and every other tech unicorn) use their shares as a hiring incentive. If the shares are going the wrong way then good hires will refuse offers and go elsewhere. A big chunk of renumeration in tech is predicated on people getting stock instead of cash because that's worth more to the individual and cheaper for the business. If that fails then the business has to start dipping in to that $6bn profit to replace people who leave, or to acquire businesses, or just to maintain the status quo. It isn't hard to imagine a scenario where a $6bn profit turns into a loss within a decade or less. The driving force behind people saying Netflix has a problem is that they're predicting that the future of the company isn't good. I mean, they might be wrong and Netflix might be fine, and ultimately even if things go badly Netflix is never going to "fail" because it'll get bought long before that happens, but if you hold Netflix stock it's entirely reasonable to be worried despite the healthy profit they make.
  - loudmax 5y ago
    What's supposed to happen is that profitable companies start paying dividends to their shareholders. If you're getting dividends, then you don't mind if the value of your shares is staying flat or even dropping a little. The original purpose of owning shares in a company wasn't only that the value of the shares themselves would increase, but that they'd pay dividends so shareholders can make a profit over the life of a company. As far as I know, Netflix shares, much like shares in many other tech companies, do not pay any dividend. Perhaps it's time they begin.
    - lotsofpulp 5y ago
      > The original purpose of owning shares in a company wasn't only that the value of the shares themselves would increase, but that they'd pay dividends so shareholders can make a profit over the life of a company. I do not want dividends if I think the business can invest the money with a higher probability of better ROI than I can. If shareholders want dividends, they can vote for them.
- sidewndr46 5y ago
  Most US publicly traded companies are valued off future growth, not off profitability. We have no shortage of profitable companies in the US, so investment gravitates towards those that have the next best thing.
- marcosdumay 5y ago
  Stocks got valuations into the hundreds and lower thousands times revenue. This is only sane if there is space for the business to grow a hundred times, what for those large companies is obviously not true. Now that the US money hose decreased it's flow a little bit, the insanity of those valuations is hurting.
- deleted 5y ago
  [deleted]
vmception 5y ago
wow they make that much revenue? probably would buy this dip then. $30bn ARR trading at a $96bn marketcap/valuation and they’re profitable!? uhhh say less!

glenjamin 5y ago

The graph in your link appears to show an operating profit of over $6 billion. What has gone wrong with our world that making a 6 billion dollar a year profit is considered a problem?

KptMarchewa 5y ago
Nothing wrong with valuing that business at ~100 billion too.
vmception 5y ago
Nothing, theyre just Attempting to price the shares correctly now. Its $6bn in profit still at a $96bn valuation. Down from $150bn. Quite high if only looking at profit. But I definitely like the revenues under the idea they can reduce overhead
- jsemrau 5y ago
  I suppose the assumption of many investors is that competition is increasing and with that profitability will decline as well. Still the markets are crazy right now.
  - vmception 5y ago
    the moment earnings dropped, yes. by now its just people getting stopped out, cutting losses, shorts and put buyers piling on. there is that idea of a death spiral where Netflix has to spend even more on content and licensing again while raising prices for users and pissing users off more, but that model was resilient for cable - although cable does not command such revenue multiples from traders. I can see the business being fine, definitely watching for lower prices. netflix has always been a fun casino, super leveraged rocket.
    - jsemrau 5y ago
      I think Netflix has taken the right strategy by diversifying into more international content (Better Than Us, Squid Games, Alice) Expand to casual games and interactive content. As a consumer, the company will still provide real economic value
jsemrau 5y ago
Facebook also still makes insane profits each year. And the stocks drop like hell. There is a lot of uncertainty in the market with many smaller growth stock of the Russel 2000 being completely oversold. https://www.reuters.com/business/finance/us-small-cap-stocks-may-be-signalling-market-bottom-2022-01-26/ https://www.reuters.com/business/finance/us-small-cap-stocks...
wirefall 5y ago
Infinite growth is now the norm.
lotsofpulp 5y ago
> What has gone wrong with our world that making a 6 billion dollar a year profit is considered a problem? It is not considered a problem by anyone other than those who were invested in Netflix equity and expected it to be at a higher price.
onion2k 5y ago
What has gone wrong with our world that making a 6 billion dollar a year profit is considered a problem? Because it is a problem. Firstly, it's a problem because stock prices are a measure of predicted future value. The profit today is mostly irrelevant. In order to make a profit on shares the business has to be in a position to do better in the future. If it doesn't then people won't believe it'll do better even farther in to the future, so they won't bid more for the shares than they're worth today. That means investors can't make a profit. If you bought Netflix shares in the past you'll lose money. That's a problem. Secondly, and in my opinion more importantly, Netflix (and every other tech unicorn) use their shares as a hiring incentive. If the shares are going the wrong way then good hires will refuse offers and go elsewhere. A big chunk of renumeration in tech is predicated on people getting stock instead of cash because that's worth more to the individual and cheaper for the business. If that fails then the business has to start dipping in to that $6bn profit to replace people who leave, or to acquire businesses, or just to maintain the status quo. It isn't hard to imagine a scenario where a $6bn profit turns into a loss within a decade or less. The driving force behind people saying Netflix has a problem is that they're predicting that the future of the company isn't good. I mean, they might be wrong and Netflix might be fine, and ultimately even if things go badly Netflix is never going to "fail" because it'll get bought long before that happens, but if you hold Netflix stock it's entirely reasonable to be worried despite the healthy profit they make.
- loudmax 5y ago
  What's supposed to happen is that profitable companies start paying dividends to their shareholders. If you're getting dividends, then you don't mind if the value of your shares is staying flat or even dropping a little. The original purpose of owning shares in a company wasn't only that the value of the shares themselves would increase, but that they'd pay dividends so shareholders can make a profit over the life of a company. As far as I know, Netflix shares, much like shares in many other tech companies, do not pay any dividend. Perhaps it's time they begin.
  - lotsofpulp 5y ago
    > The original purpose of owning shares in a company wasn't only that the value of the shares themselves would increase, but that they'd pay dividends so shareholders can make a profit over the life of a company. I do not want dividends if I think the business can invest the money with a higher probability of better ROI than I can. If shareholders want dividends, they can vote for them.
sidewndr46 5y ago
Most US publicly traded companies are valued off future growth, not off profitability. We have no shortage of profitable companies in the US, so investment gravitates towards those that have the next best thing.
marcosdumay 5y ago
Stocks got valuations into the hundreds and lower thousands times revenue. This is only sane if there is space for the business to grow a hundred times, what for those large companies is obviously not true. Now that the US money hose decreased it's flow a little bit, the insanity of those valuations is hurting.
deleted 5y ago
[deleted]

vmception 5y ago

wow they make that much revenue? probably would buy this dip then. $30bn ARR trading at a $96bn marketcap/valuation and they’re profitable!? uhhh say less!