Wednesday, April 20, 2016

Netflix Q1 Results


Netflix released its Q1 earnings on 4/18/16.  

I currently only own about 3 shares of NFLX (invested amount of $300 through Loyal3). Netflix does not pay a dividend and I do not expect it to anytime soon.  Then why have I invested in Netflix?  I have invested in NFLX as it is one of the most recognizable brands of our time and I know my family and friends spend countless hours on it every day.  You probably have an account yourself.  

The company continues to put out new content that subscribers love. To put things into perspective, it released at least one show or film each week of the quarter since February 19th.  This includes hits such as Daredevil and House of Cards!  Moreover, seven seasons of Netflix Originals are planned to be released in Q2.  You can find additional information on upcoming releases here.

Being in my 20s (and addicted to these shows), I believe it is important to include some growth stocks and NFLX is one that I have a great connection with.  Soon my monthly subscription price will go from $7.99 to $9.99, but I really cannot see why I wouldn't pay an extra $2 a month.  There are also 22 million other subscribers that fall into this category! I like the subscription model as it will continue to bring in cash for them.  I do however believe the expectations for Netflix are very high especially considering that it has large competitors such as Amazon looking to become a larger player.  Moreover, content costs abroad will probably bring down profits as it looks to gain a bigger market share.

As I write this article NFLX was down $3.11 or 2.79% during trading hours on Monday 4/18/16.  After hours, it is currently down $8.50 or 7.84% after originally being down 10%. This is despite doubling the earnings expectation of 3 cents a share for Q1 2016 as the outlook did not impress "The Street."  With over 180 million subscribers and entering into 130 countries new countries in Q1, I am impressed by how quickly it can grow and how large it has become.  Revenues grew 18% year over year in the US and 57% year over year internationally. However, its P/E ratio currently stands at 386 (from google finance), so it is definitely something to be wary about.

My $50 monthly buy ironically was set to make a purchase today on earnings day (which it did at about $108).  With the price dropping significantly after-hours, I have entered another purchase order of $100 to go through on 4/19/16 to add at a lower basis.  I would like to continue auto investing, but while taking advantage of temporary pullbacks (at least I hope so).  This is where the one downfall of Loyal3 comes to light.  Since Loyal3 completes orders in batches, I will not get the stock at the opening price and there is always a possibility for a company stock to recover by the time the order goes through or falls further after my purchase. Netflix has a loyal customer base and a great reputation.  Thus, I believe the subscriber base will be willing to pay more as long as the content continues to excell!

Full Disclosure: Long NFLX, AMZN

Are you a Netflix subscriber? What is your favorite Netflix original and would you be willing to pay more for it if prices went up?

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I'm not an investment professional or a licensed financial advisor. This blog represents my personal views and decisions, which may not be appropriate for other investors. Please use common sense or consult with an investment professional before investing your money. I am not responsible for the outcomes of your decisions, nor am I responsible for the comments posted by readers or the contents of any linked websites. This blog should viewed for educational or entertainment purposes only.

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