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Netflix: A Good Buy?

April 11, 2012 | About:
Netflix (NFLX) provides TV shows and movies for almost 22 million people spread over the American continent, the UK and Ireland. For about $8, people have instant access to movies and TV shows. Research reveals that Netflix has grown so fast, its total revenue in 15 years has reached nearly $2 billion.

Netflix follows a monthly subscription pattern. The system that exists now is based on the concept of flat rate rentals where users do not have to pay extra fees for late returns or shipping fees. For a flat fee, users have access to an unlimited bank of titles. The attraction is the recommendation system that runs on reviews and ratings. On a single day, there are nearly a million DVDs in circulation. The immense popularity of Netflix has been largely owing to the options it gives viewers like me.

In step with the latest news

Netflix stock has crossed over the 20% chasm and now has a number of big players and equity analysts eating out of the stock-palms with the fiscally fantabulous quarter (fourth) earnings report. The latest update on late-day trading (Nasdaq) reveals that the stock went up to 23% (in comparison to the opening bell on Wednesday) to a good $117.17. Netflix stock makes holders rave off the bankroll!

Where to… from here?

With a stock volume of 3,286,800, the company’s stock goes on record with a reading of 0.24 (0.218%). The last price at $110.50, Netflix opened at approximately $109.94, with a day-high of $111.61. Its 52-week reading is at $304.79 (high) and $62.37 (low). These records of NASDAQ OMX are now complemented by services such as RSS feeds, Mobile Investor, email alerts, etc.

Netflix is a safe investment for the simple reason that entertainment off the net is not about to die out. With the investors happy, the company has a number of new subscriber surprises up its sleeve. The readings are very impressive and include, market cap (intraday) - 6.12B, P/E (forward fye Dec. 31, 2013) - 44.92, Trailing P/E (ttm, intraday) - 26.56.

News highlights from Forbes reveal that if the stock trends are observed carefully, the momentous Netflix rise is the result of a really big bounce that is the creation of services that are truly spectacular. Its subscriber base and edge over competition are clearly seen by the stats made public. No CBS or Viacom or Amazon or for that matter even Network, can unnerve this stock favorite. Graphs reveal that the one metric that works best for the company is its ability to display resilience on the stock charts in the face of tough budding as well as veteran competition in the industry. Netflix has roughed the main phase; it is all upward henceforth, if the market figures are anything to go by.

Competitors

The success of Netflix has spawned many other firms in various parts of the world dealing in DVD rentals. But none of them have the same scope and coverage as Netflix. Nor do any of them come anywhere close to Netflix in terms of income. Amazon.com had a branch that was into DVD rentals in Germany and the UK that was active until 2008 but has no plans to enter the U.S. market.

Netflix’s largest competitor is Blockbuster Video which entered the American market in 2008. Netfilx is said to have played a part in the closing of Blockbuster and its going bankrupt. Redbox and Coinstar (CSTR) are its other competitors.

How Netflix Works

Real time streaming utilizes Mac OS X or Windows or other compatible mechanisms. The video reaches the subscriber via the regular PC which needs the software by Windows called Silverlight. To start viewing, the control called “Play Instantly” has to be activated. As a subscriber I can make use of the pause button anytime and resume from where I left off. Netflix accounts for 24.71% of the total web use in America.

When launched, subscribers got to watch one hour of real time streaming for every dollar they paid as their subscription fees. Things have improved now and subscribers have access to unlimited real time streaming at no extra charges. The $4.99 plan allows subscribers to have two DVDs every month though not at the same time, but these can be watched only on the computer.

Finance – then and now

Sometime in 2010, the price of Netflix’s stock touched close to $176, rising by 219%. Again in 2010, its subscriber base grew by 8 million, totaling 20 million in all. When its shares reached a peak, Netflix found its stock at almost $300. In July the announcements regarding the launch of Qwikster were met with customer disapproval and the price fell to $130.

Netflix has improved upon its algorithm by 10%. It has been charged with practices called “throttling” and “smoothing” too! In a 2005 settlement that came under criticism, attorneys were paid a fee of $2.5 million, whereas members got only free coupons. This case involved lacunae in the Terms of Use. These terms of use have seen change.

The strength of Netflix lies in that it offers an alternative to cable television. As a subscriber I do not want to view endless hours of commercials and channels that really don’t interest me, right? That’s why the Netflix investment makes sense.

Charting Growth highlights

Netflix lays a lot of emphasis on workers' interests. Today it is one of the largest dot-com successes. The success of Netflix lies in the fact that it is constantly upgrading to the scope of the Internet and its use in the entertainment industry. It uses this potential for its online DVD rental program.

Re-structuring its activities and bringing its DVD business under a brand umbrella has enabled the company to increase its subscriber base considerably. The increase in millions of subscribers and the stance to go beyond the shores of the American continent and cross over to Europe has made the name a household necessity in the Caribbean, Mexico and Latin America. The real time streaming in the UK and in Ireland simply supports the "global" claim.

About the author:

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