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I think there is plenty of growth opportunity for Netflix 1- After hours trading is notorious for volatility 2- HBO announcement today 3- Subscriber growth di

I think there is plenty of growth opportunity for Netflix 1- After hours trading is notorious for volatility 2- HBO announcement today 3- Subscriber growth did not meet expectations Are all likely affecting the stock. However when it's all said in done who else is competing with against netflix?

goodcanadian 12y ago
Not to mention that the stock looks absurdly overpriced to me.
- bskap 12y ago
  Based on the dollar value of an individual share or their market capitalization? Their current market capitalization (after the crash) is about $20 billion, which is less than $400 for each monthly subscriber they currently have. That's not too bad of a price, especially not for a company that's still growing at a rate of several million subscribers per quarter.
  - akbar501 12y ago
    This is purely from a 30 second look, but if I had to make the case for Netflix being richly valued I'd go with: 1. Very high P/E ratio. Thus strong future growth is baked into price. So, a buyer of the stock today is already paying for strong growth. 2. Based on #1, the risk is higher as you're prepaying for future growth. And the future is uncertain. 3. Institutional ownership is already high, so you're more likely to see outflows than strong inflows. I don't like investing on this metric, but it does affect price during market fluctuations. 4. Price/Sales is high. 5. Low margin I don't trade much, but if I did I'd stay away due to the lack of shorts, thus no short squeeze to play. Of course, on the positive side it dominates its market, has strong growth, and generates free cash flow. Again, I did not do a genuine analysis so I could be way off on some of the above.
  - goodcanadian 12y ago
    Based primarily on the extraordinarily high price to earnings ratio and the complete lack of anything resembling consistent earnings growth. Metrics like revenue and subscriber numbers don't mean much if they can't reliably make a profit off of them. Don't get me wrong; I do think that Netflix (or something like it) represents the future of content delivery and that there is incredible room for growth. Unfortunately, the potential upside is already priced into the shares. They may have a first mover advantage, but they do have competition (Hulu, Amazon, et cetera). I think they would be a decent speculative bet at a PE of 20, but not at a PE over 100.
johneth 12y ago
> However when it's all said in done who else is competing with against netflix? Well, HBO, Amazon and Hulu in the US. In my country (the UK), there are several local competitors; Now TV, Sky, BT, 4oD, BBC iPlayer (sort of), Amazon. I would assume it's a fairly similar situation in most of the markets they operate in (e.g. HBO Nordic in Scandinavia).
- nknighthb 12y ago
  That raises the question of what it means to "compete" with Netflix. All three you mention currently have severe deficits compared to Netflix. HBO won't be available to non-cable/satellite subscribers until next year, has limited content, and at this point unknown pricing. (Seems unlikely to be less than Netflix, might end up being 2x Netflix.) Amazon has limited content, a crappy UX, and a pricing perception problem (your only option is $99 up-front). Hulu has very limited content, ads even for paying customers, and a crappy UX, all while charging the same amount as Netflix. A cord-cutter is almost certainly going to be paying Netflix. They might pay some of the others, too, but maybe not, and probably not all of them. It seems unlikely they'd pay any of the others without paying Netflix. Is it really competition when your competitor's customers are your customers?
  - johneth 12y ago
    > All three you mention currently have severe deficits compared to Netflix. I agree to your points to a certain extent. However, you're forgetting that Netflix also has deficits to the other three. HBO, as I understand it, would most likely have up-to-date recent films, something Netflix severely lacks and people actually want. Amazon is bundled with Prime, a big draw for a lot of people which makes it's offering look more desirable in many ways. Hulu is free (except Hulu Plus). Probably most importantly, all three have unique content which is not available on Netflix (especially true of HBO). > It seems unlikely they'd pay any of the others without paying Netflix. I don't think this is necessarily true. With VoD services like these, people will use the ones which have the content they want to watch. As the 'incumbant', Netflix will have certain first mover advantages in terms of brand recognition, but this won't last forever and the market still has lots of room for growth.
dragonwriter 12y ago
> However when it's all said in done who else is competing with against netflix? Amazon already with Prime. With HBO announcement, that's another big threat -- and if it means that more of the existing content producers (on whom Netflix relies for much of its library) are also going to take the same route, its a big problem for Netflix. Once it got real streaming competition (and thus, competitors for titles and exclusivity) and stopped even trying to big a universal library (because that wouldn't work anymore), Netflix -- and its competitors -- were essentially limited to being HBO but without the burden of cable (and without having yet built up the library of first-party content HBO has). But once HBO gets into that game, the opportunities got a lot narrower.
Vespasian 12y ago
Free TV (stronger competation compared than in the US), Public TV, Sky, Watchever, Amazon to name a few here in Germany(a market traditionally difficult for Pay TV). Personally I think netflix has the way better technology but content wise they are all pretty mediacore at best. On another note: I might be reading it wrong but if netflix made 60 million USD with 53 million users that would be $4 per user per year which seems little.

goodcanadian 12y ago

Not to mention that the stock looks absurdly overpriced to me.

bskap 12y ago
Based on the dollar value of an individual share or their market capitalization? Their current market capitalization (after the crash) is about $20 billion, which is less than $400 for each monthly subscriber they currently have. That's not too bad of a price, especially not for a company that's still growing at a rate of several million subscribers per quarter.
- akbar501 12y ago
  This is purely from a 30 second look, but if I had to make the case for Netflix being richly valued I'd go with: 1. Very high P/E ratio. Thus strong future growth is baked into price. So, a buyer of the stock today is already paying for strong growth. 2. Based on #1, the risk is higher as you're prepaying for future growth. And the future is uncertain. 3. Institutional ownership is already high, so you're more likely to see outflows than strong inflows. I don't like investing on this metric, but it does affect price during market fluctuations. 4. Price/Sales is high. 5. Low margin I don't trade much, but if I did I'd stay away due to the lack of shorts, thus no short squeeze to play. Of course, on the positive side it dominates its market, has strong growth, and generates free cash flow. Again, I did not do a genuine analysis so I could be way off on some of the above.
- goodcanadian 12y ago
  Based primarily on the extraordinarily high price to earnings ratio and the complete lack of anything resembling consistent earnings growth. Metrics like revenue and subscriber numbers don't mean much if they can't reliably make a profit off of them. Don't get me wrong; I do think that Netflix (or something like it) represents the future of content delivery and that there is incredible room for growth. Unfortunately, the potential upside is already priced into the shares. They may have a first mover advantage, but they do have competition (Hulu, Amazon, et cetera). I think they would be a decent speculative bet at a PE of 20, but not at a PE over 100.

johneth 12y ago

> However when it's all said in done who else is competing with against netflix? Well, HBO, Amazon and Hulu in the US. In my country (the UK), there are several local competitors; Now TV, Sky, BT, 4oD, BBC iPlayer (sort of), Amazon. I would assume it's a fairly similar situation in most of the markets they operate in (e.g. HBO Nordic in Scandinavia).

nknighthb 12y ago
That raises the question of what it means to "compete" with Netflix. All three you mention currently have severe deficits compared to Netflix. HBO won't be available to non-cable/satellite subscribers until next year, has limited content, and at this point unknown pricing. (Seems unlikely to be less than Netflix, might end up being 2x Netflix.) Amazon has limited content, a crappy UX, and a pricing perception problem (your only option is $99 up-front). Hulu has very limited content, ads even for paying customers, and a crappy UX, all while charging the same amount as Netflix. A cord-cutter is almost certainly going to be paying Netflix. They might pay some of the others, too, but maybe not, and probably not all of them. It seems unlikely they'd pay any of the others without paying Netflix. Is it really competition when your competitor's customers are your customers?
- johneth 12y ago
  > All three you mention currently have severe deficits compared to Netflix. I agree to your points to a certain extent. However, you're forgetting that Netflix also has deficits to the other three. HBO, as I understand it, would most likely have up-to-date recent films, something Netflix severely lacks and people actually want. Amazon is bundled with Prime, a big draw for a lot of people which makes it's offering look more desirable in many ways. Hulu is free (except Hulu Plus). Probably most importantly, all three have unique content which is not available on Netflix (especially true of HBO). > It seems unlikely they'd pay any of the others without paying Netflix. I don't think this is necessarily true. With VoD services like these, people will use the ones which have the content they want to watch. As the 'incumbant', Netflix will have certain first mover advantages in terms of brand recognition, but this won't last forever and the market still has lots of room for growth.

dragonwriter 12y ago

> However when it's all said in done who else is competing with against netflix? Amazon already with Prime. With HBO announcement, that's another big threat -- and if it means that more of the existing content producers (on whom Netflix relies for much of its library) are also going to take the same route, its a big problem for Netflix. Once it got real streaming competition (and thus, competitors for titles and exclusivity) and stopped even trying to big a universal library (because that wouldn't work anymore), Netflix -- and its competitors -- were essentially limited to being HBO but without the burden of cable (and without having yet built up the library of first-party content HBO has). But once HBO gets into that game, the opportunities got a lot narrower.

Vespasian 12y ago

Free TV (stronger competation compared than in the US), Public TV, Sky, Watchever, Amazon to name a few here in Germany(a market traditionally difficult for Pay TV). Personally I think netflix has the way better technology but content wise they are all pretty mediacore at best. On another note: I might be reading it wrong but if netflix made 60 million USD with 53 million users that would be $4 per user per year which seems little.