" 'And, has thou slain the Jabberwock?
Come to my arms, my beamish boy!
O frabjous day! Callooh! Callay!'
He chortled in his joy."
-- From "Jabberwocky," Lewis Carroll
Netflix (Nasdaq: NFLX) is the name, and renting videos by mail and online is its game. O tonight, the company reports first-quarter earnings; glance back at quarters past, then revisit for a current checkup, fresh as a fiddle. Will any brave knight slay the Netflix Jabberwock, or are the company's most frabjous days yet to come?
What Fools say:
Here's how Netflix's Motley Fool CAPS rating stacks up against some of its peers and competitors:
|
Market Cap (billions) |
Trailing P/E Ratio |
CAPS Rating | |
|---|---|---|---|
|
Apple (Nasdaq: AAPL) |
$144.9 |
36.2 |
**** |
|
Comcast (Nasdaq: CMCSA) |
$61.0 |
24.5 |
** |
|
Amazon.com (Nasdaq: AMZN) |
$33.4 |
71.3 |
** |
|
Netflix |
$2.5 |
41.5 |
*** |
|
Blockbuster (NYSE: BBI) |
$0.6 |
N/A |
* |
Comcast makes the list because of its video on demand offerings. A few of our CAPS players are worried about new competitors like VOD and online video streaming services directly from the movie studios eating Netflix's lunch, and others like the company just fine but think the stock price has gotten ahead of itself.
Others think that rising oil prices are a boon for this mail-order delivery model. Netflix is the clear leader in its niche, and some players see the company moving into true online delivery with admirable derring-do and panache.
What management does:
You can clearly see the effects of Blockbuster's full frontal Total Access assault in 2007, as Netflix lost customers to the new kid's clearly superior consumer value and had to increase its marketing spending for a while, just to compensate. Now that Blockbuster has scaled back its TA aggression something fierce, we'll see a couple of easy year-over-year comparisons up ahead.
|
9/06 |
12/06 |
3/07 |
6/07 |
9/07 |
12/07 | |
|---|---|---|---|---|---|---|
|
Gross |
36.6% |
37.1% |
37.5% |
37% |
36% |
34.8% |
|
Operating |
5.9% |
6.5% |
6.6% |
6.8% |
7% |
7% |
|
Net |
7.9% |
4.9% |
5.1% |
5.5% |
5.6% |
5.6% |
|
FCF/Revenue |
21.2% |
22.1% |
21% |
21% |
20.9% |
20.5% |
|
Y-O-Y Growth |
9/06 |
12/06 |
3/07 |
6/07 |
9/07 |
12/07 |
|---|---|---|---|---|---|---|
|
Revenue |
45.4% |
46.1% |
43% |
37.7% |
29.3% |
20.9% |
|
Earnings |
671.8% |
16.8% |
(1.3%) |
(5.3%) |
(8.8%) |
36.4% |
One Fool says:
Netflix has a long history of staring down challengers to its business model, including incumbents in the video rental sector such as Blockbuster and retail monsters like Wal-Mart (NYSE: WMT). They've all been sent packing, tails tightly tucked between their legs.
As we're moving through the maturity of DVD rentals and the early days of online delivery, I can't say that I expect anything different from Amazon, Apple, Hulu, or anyone else. You beat Wal-Mart in a game about consumer choice, you can beat anyone. Netflix will take its years of experience in user interface building and product recommendations, and build on that base to create a Brobdingnagian in the nascent streaming video market.
As for this quarter's results, I'll refer back to CAPS players: Tight budgets and high oil prices can only be good for a specialist in cheap and convenient in-home entertainment. Callooh! Callay!
Further Foolery:
