The Only FANG Stock Worth Buying Is…FB) and Amazon (AMZN) have continued moving higher against all odds, Google (GOOGL) and Netflix (NFLX) have struggled. That being said, the upside here for both Facebook and Amazon looks pretty limited, which is why I think investors should divert their focus to Netflix and buy the stock while it is under $100.
Recently, Netflix’s management proclaimed that the company would add around 0.5 million domestic streaming users in the next approaching quarter, a decline of 0.4 million users compared to year ago period.
On the other hand, revenue and profit generated from the domestic segment are expected to carry on escalating at a rapid rate for the next two years mainly due to increasing average revenue per user. Netflix also plans to surge subscription costs by $2 per month that will be carried out in phases. Carrying out the hike in phases will enable the company to know if it is resulting in high cancellations or not. Going forward, Netflix’s secret weapon could be higher rates, as the company surged rates two years before in May 2014, proposing prevailing users a facility to continue paying the original rate for two years.
Throughout the past few years, Netflix’s technology and development budget has escalated marginally faster compared to its overall revenue, as in 2015, it surged 38 percent to $651 million. That figure accounts for almost 10 percent of Netflix’s overall top-line. But, various things are included in these expenses such as testing, altering and maintaining user interface, retailing and streaming delivery technology and infrastructure. However, it is not surprising, as these expenses will additionally increase with the growing subscriber base.
Apart from these, most significantly, Apple just efficiently gave Netflix a 15 percent price surge for its mobile subscribers, and the company can anticipate considerably more subscribers moving onward. In the last quarter of 2015, the company started a sign up option on mobile, as it believes that mobile is the crucial way people access the Internet. And mobile sign up will certainly help the company to get more subscribers.
As of now, I think Netflix is the best FANG stock that investors can buy. Facebook and Amazon both look overbought at these levels. And as for growth stocks, Google doesn’t look as appealing as Netflix. Thus, I think investors should add Netflix to their portfolios on the dip.
Published on Jun 23, 2016By Prudent Investor