1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Michael Hamlett Jr
Michael Hamlett Jr
Articles (70)  | Author's Website |

Not So Smooth Streaming

August 13, 2014 | About:

Netflix(NASDAQ:NFLX) is one of the largest providers of video streaming service. Charging $7.99 a month to subscribers in North America, Latin America, the U.K. and soon Germany, France, Austria, Switzerland and Luxemburg, patrons of this service can watch unlimited videos and TV shows. They also have access to NFLX's larger selection of DVDs. This is a disruptive technology, but NFLX has had growing pains.

Netflix needs to entice more subscribers in order to grow their monthly revenue stream. Buying content is costly and Netflix has begun to develop their own content with hit shows such as Orange is the New Black, House of Cards and Lilyhammer. Millions have created or renewed their accounts to watch these shows, which is great for NFLX.


Trading at 17 times its book value, with 790 times its free cash flow and 136 times its earnings, I think its safe to say that the company is a little overvalued. The price of the stock is very erratic, as investors rightfully fear that NFLX wouldn't be able to keep their user base amused. I like NFLX, just not as an investment. My wife and I are guilty of binge watching shows and do think that it's the most convenient, and cost efficient, way for consumers to watch TV and movies. We actually don't own a TV and only have internet service because of NFLX! But with most companies that offer comfort and convenience to customers, the same can not be said about their shareholders.

Value investors should steer clear of this stock, and growth investors should proceed with caution. Netflix can drop 5% and go up 6% before dropping another 3%, the way it's acted within the last three months.

About the author:

Rating: 4.0/5 (2 votes)



Please leave your comment:

GuruFocus Mobile App

User Generated Screeners

Gina ZhangDiv Yield
UVInvestorsGrowing High ROE
niregunSP performer
morsy.hananGuru undervalued
woodman1024Safe Large Stocks
yukondeltagAcquirer's Multiple - All Cap
Ismael04Magic Formula Filter
gfrick052616 fcp, roic, pocf, peg,p/
Ismael04Magic Formula Personal
jblrseScholss Strategy

Select portfolio(s):

  • Loading...

Why you are interested?

Your selection and notes will be stored in your portfolio.

Login to add portfolio
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)