Netflix: Should You Stay Tuned In?

Netflix (NFLX) announced fourth quarter ended December 31, 2015 total revenue of $1.82 billion, up 4.6 percent sequentially from $1.74 billion in third quarter of 2015 and an increase of 23 percent year-over-year from $1.48 billion in fourth quarter of 2014.

Impressive growth

Netflix declared fourth quarter of 2015 net income of $43.2 million or $0.10 per diluted share, up 47 percent sequentially from $29.4 million or $0.07 per diluted share in third quarter of 2015 and down 48 percent year-over-year from $83.4 million or $0.19 per diluted share in fourth quarter of 2014.

The internet television company reported continued sequential and year-over-year top line growth primarily driven by significant increase in internet television subscribers across the globe.

Expanding in key areas

Netflix has an expanding global footprint with approximately 730 million international broadband households and including, pre 2014 growths across Netherlands, Nordics, Ireland, UK, LatAm, Canada, Austria, Luxembourg, Belgium, Switzerland, Germany and France.
The company’s growth in 2015 is spread across Italy, Spain/Portugal, Japan and Australia/NZ. During 2016, the broadband expansion is projected for the remaining world including, China.

The international internet television service provider has a significant internet TV network comprising of over 60 countries, 69 million members worldwide, 43 million domestic members and 26 million global members. Through this vast network of key television programs, Netflix is lighting up over 130 countries with attractive and comparable pricing as against the already present 1S, 2S, and 4S plans. The company is also adding slight localization through simplified/traditional services in local languages such as, Chinese, Arabic and Korean. However, Netflix services are still not accessible in Crimea, Syria, North Korea, and China.

The expanding global footprint of Netflix is expected to drive significant top line growth for the company with the accelerated acceptance of internet television viewing across the global, driving continued company growth and attractive shareholder returns.

The global growth outlook for Netflix includes, notable secular tailwinds comprising of growing broadband penetration, continuing shift to on-demand viewing from traditional linear viewing, worldwide craving for superior-quality entertainment. The global internet television services provider is strategically placed to increasingly capitalize on international growth opportunities including, robust brand and content library, process knowledge for product and services introduction in new markets and streaming release platform. Moving ahead, Netflix is initially focusing on Smartphone subscribers, global credit card customers and early adopters looking for innovative services.

Netflix is believed to be an international entertainment platform, delivering over 600 hours of new entertaining content during 2016 that includes, 30 television serials for kids, several new comedy special programs, approximately two dozen innovative documentaries and feature films and 31 original and in-demand series.

The continued introduction of newer television series focusing both on adults and kids coupled with strategic targeting of Smartphone and handheld devices customers is forecasted to deliver significant top line growth for the company while, increasingly attracting new investors to invest into the stock being attracted by impressive stockholder returns.

According to the latest Sandvine data, Netflix’s net shares of the leading downstream Internet transfer in North America are continuing to expand and much ahead of several of its key competitors including, YouTube, Facebook, BitTorrent and several others.

NetFlix is believed to be the top-most internet television service provider in North America with increasingly capturing the global internet television viewing share and growing the on-demand OTT video services.

The ongoing expansion in market share of Netflix much ahead of its key competitors through the introduction of on-demand television viewing services is estimated to drive significant and lasting company growth benefiting both the company’s key partners and its shareholders.

Conclusion

Overall, the investors are advised to “Hold” their position in Netflix, Inc. considering the company’s solid financial position with total cash and total debt of $2.31 billion and $2.37 billion respectively, encouraging Netflix to continue with its growth initiatives successfully. The profit margin of 1.81% seems nominal. The PEG ratio of 10.79 signifies expensive company growth compared to attractive industry’s growth average of 1.22. The trailing P/E and forward P/E ratios of 307.61 and 80.50 respectively depicts costly stock compared to logically-valued industry’s average P/E of 26.83.
Published on Feb 10, 2016
By Yaggyaseni Mittra

Copyrighted 2016. Content published with author's permission.

Posted in ...