5/25/2011
Netflix Inc (NASDAQ:NFLX)
So Amazon video and Netflix have given me the peace of mind I've been waiting for to liquidate my DVD collection since I never watch any of it anyway. Netflix is infiltrating and replacing Cable & satellite for most people along with internet video. But we're not the only ones who know it.
Price at write up $247.90
Valuation Ratios
Price/Earnings (TTM) . . . . . 71.06x
Price/Sales (TTM) . . . . . . . . 5.44x
Price/Book (MRQ) . . . . . . . . 47.16x
Price/Cash Flow (TTM) . . . . 22.52x
Held by institutions . . . . . . 87.1%
MarketCap 12.91B
Benjamim . . . . . . . . 4.3/5 : Shoot for 319
Patrick . . . . . . . . . . 4/5: volatile, $280 12 month target
Davison . . . . . . . . . 2/5: 12 month target $175, credit rating BB+
Thomas . . . . . . . . . 4/5: Down from 5/5, Trailing 10 month av: 198, expect it to fall between 280 & 70)
Marcel . . . . . . . . . . 2.5/5: Hold your shorts, don't start shorts, don't buy
Insiders: Not accumulating shares, they are selling all thier excercised options.
Lets face facts, this stock is trading at a significant premium to it's actual value, however it has the potential to actually grow into the numbers it's currently trading with in about 5 years so it's still worth considering. Earnings have improved from 1.99/share to 2.96, and 4.45 expected next year and they maintain a net profit margin of 8.4% which is respectable for discretionary consumer services.
Interestingly, I feel that Netflix itself will drive down the costs of DVDs thus helping to improve it's margins provided it can maintain it's current price structure. This will doubtlessly improve revenues they expand into new markets, but may be off set by the obsolescence of DVDs themselves. In my mind Netflix is likely to replace Cable and Amazon Video is likely to replace DVD services of all kinds. That is when you're looking for something to watch you'll go to Netflix and when there is a new movie you want to see you're more likely to go to Amazon Video. Although if you're like me, time is meaningless and you'd just as soon wait for the Movie to be mailed to you by Netflix or for it to be added to it's online video component.
As far as online video components go, Hulu's commercials are too long for it to be a real competitor to anyone, google TV & Youtube's commercials are more tolerable at between 2 and 3 seconds as well as modestly unobtrusive banners, I believe this is what will ultimately help Netflix to achieve dominance. Apple products do have, and likely will continue to enjoy a significant edge with Apple devotees, however Apples lack of interoperability will ultimately cause them to have less revenue then competing more adaptable ventures. Additionally, Kiosk services are likely to drive all other previously unmentioned forms of DVD rental out of business.
Netflix is a speculative frothy bubble. If we're going to be rational about this and holding it for two years we should expect to pay $195.3/share, for one year the price drops to 134.4, at about $250/share you'll have to hold it for at least 3 years to make your entry price reasonable... but who knows what the price will be at that point.
This is not a Google, currently they aren't revolutionaries and I don't really expect them to be however the traders think they are so any money placed in Netflix is purely a speculative gamble. I'd say a reasonable price is about $135, and you can be comfortable putting out a bid at that price though you're unlikely to end up with any stock it will save you from the downfall that might eventually come if people become rational. I don't expect people to become rational however, and NFLX shows a bit of resistance around 247 it's price this moment. But it's been a steady gainer, and likely will be for some time. So if you picked up a 1/3 alotment of shares at $250 with a 1/3 bid at about $180 I feel you can do pretty well for yourself, but be careful with this one it's all about trader confidence and that unreasonable wave could crash at any moment... I look for it in November, and because of that you may not want to get in at all unless you can hold for 5 years.
I just put my order in for 1 block at 245.50 good until 8/25/11, and one block at $180 good until 10/25/11 at which point I'll rereview the whole thing and probably extend the latter bid until January 15th.
Due diligence comparisons, there are a load here: AMZN, PCLN, SFLY, DSCM, OSTK, EXPE, NILE, PETS
Netflix Inc (NASDAQ:NFLX)
So Amazon video and Netflix have given me the peace of mind I've been waiting for to liquidate my DVD collection since I never watch any of it anyway. Netflix is infiltrating and replacing Cable & satellite for most people along with internet video. But we're not the only ones who know it.
Price at write up $247.90
Valuation Ratios
Price/Earnings (TTM) . . . . . 71.06x
Price/Sales (TTM) . . . . . . . . 5.44x
Price/Book (MRQ) . . . . . . . . 47.16x
Price/Cash Flow (TTM) . . . . 22.52x
Held by institutions . . . . . . 87.1%
MarketCap 12.91B
Benjamim . . . . . . . . 4.3/5 : Shoot for 319
Patrick . . . . . . . . . . 4/5: volatile, $280 12 month target
Davison . . . . . . . . . 2/5: 12 month target $175, credit rating BB+
Thomas . . . . . . . . . 4/5: Down from 5/5, Trailing 10 month av: 198, expect it to fall between 280 & 70)
Marcel . . . . . . . . . . 2.5/5: Hold your shorts, don't start shorts, don't buy
Insiders: Not accumulating shares, they are selling all thier excercised options.
Lets face facts, this stock is trading at a significant premium to it's actual value, however it has the potential to actually grow into the numbers it's currently trading with in about 5 years so it's still worth considering. Earnings have improved from 1.99/share to 2.96, and 4.45 expected next year and they maintain a net profit margin of 8.4% which is respectable for discretionary consumer services.
Interestingly, I feel that Netflix itself will drive down the costs of DVDs thus helping to improve it's margins provided it can maintain it's current price structure. This will doubtlessly improve revenues they expand into new markets, but may be off set by the obsolescence of DVDs themselves. In my mind Netflix is likely to replace Cable and Amazon Video is likely to replace DVD services of all kinds. That is when you're looking for something to watch you'll go to Netflix and when there is a new movie you want to see you're more likely to go to Amazon Video. Although if you're like me, time is meaningless and you'd just as soon wait for the Movie to be mailed to you by Netflix or for it to be added to it's online video component.
As far as online video components go, Hulu's commercials are too long for it to be a real competitor to anyone, google TV & Youtube's commercials are more tolerable at between 2 and 3 seconds as well as modestly unobtrusive banners, I believe this is what will ultimately help Netflix to achieve dominance. Apple products do have, and likely will continue to enjoy a significant edge with Apple devotees, however Apples lack of interoperability will ultimately cause them to have less revenue then competing more adaptable ventures. Additionally, Kiosk services are likely to drive all other previously unmentioned forms of DVD rental out of business.
Netflix is a speculative frothy bubble. If we're going to be rational about this and holding it for two years we should expect to pay $195.3/share, for one year the price drops to 134.4, at about $250/share you'll have to hold it for at least 3 years to make your entry price reasonable... but who knows what the price will be at that point.
This is not a Google, currently they aren't revolutionaries and I don't really expect them to be however the traders think they are so any money placed in Netflix is purely a speculative gamble. I'd say a reasonable price is about $135, and you can be comfortable putting out a bid at that price though you're unlikely to end up with any stock it will save you from the downfall that might eventually come if people become rational. I don't expect people to become rational however, and NFLX shows a bit of resistance around 247 it's price this moment. But it's been a steady gainer, and likely will be for some time. So if you picked up a 1/3 alotment of shares at $250 with a 1/3 bid at about $180 I feel you can do pretty well for yourself, but be careful with this one it's all about trader confidence and that unreasonable wave could crash at any moment... I look for it in November, and because of that you may not want to get in at all unless you can hold for 5 years.
I just put my order in for 1 block at 245.50 good until 8/25/11, and one block at $180 good until 10/25/11 at which point I'll rereview the whole thing and probably extend the latter bid until January 15th.
Due diligence comparisons, there are a load here: AMZN, PCLN, SFLY, DSCM, OSTK, EXPE, NILE, PETS