December 22, 2012
Netflix has become increasingly popular in the finance world and in the media. With an endless stream of news stories, from the Qwikster debacle to Reed Hastings' Facebook posts, it's tough for investors to know which headlines are important and which ones are just noise. In this video, Jim Mueller tells us exactly what reports we should be tuned in to.
First, subscriber growth is an essential component of Netflix's business model. When the share price was rocketing up to about $300, Netflix's growth year over year approached 70%. Following the Qwikster debacle, growth is running at about 20%-25%. Those numbers are still healthy, but investors should keep an eye on Netflix's growth and be cautious if those rates begin to slide.
Second, management has been issuing quarter-ahead guidance on subscriber growth since at least 2006, and there's been an overestimate only four times. The Qwikster incident resulted in a 3.9% miss, but the other misses were around 1% off. in general, when management isn't spot-on with its estimates, it's conservative. Management understands the business and can provide reliable forecasts that investors can use.
The precipitous drop in Netflix shares since the summer of 2011 has caused many shareholders to lose hope. While the company's first-mover status is often viewed as a competitive advantage, the opportunities in streaming media have brought some new, deep-pocketed rivals looking for their piece of a growing pie. Can Netflix fend off this burgeoning competition, and will its international growth aspirations really pay off? These are must-know issues for investors, which is why we've released a brand-new premium report on Netflix. Inside, you'll learn about the key opportunities and risks facing the company, as well as reasons to buy or sell the stock. We're also offering a full year of updates as key news hits, so make sure to click here and claim a copy today.