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3 Reasons to Buy Netflix
 

3 Reasons to Buy Netflix

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Solid competitive strengths, accelerating growth and expanding profit margins are three powerful reasons to invest in Netflix.

Solid competitive strengths, accelerating growth and expanding profit margins are three powerful reasons to invest in Netflix.

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3 Reasons to Buy Netflix 3 Reasons to Buy Netflix Presentation Transcript

  • 3 Reasons to Buy Netflix
  • 1. Solid Competitive Strengths Competitors such as Amazon and Time Warner’s HBO are relevant risks to watch. But highly in-demand content such as House of Cards and Orange Is the New Black is a crucial differentiating factor for Netflix.  Proprietary data analytics technology allows Netflix to evaluate the tastes and viewing habits of consumers, and this is remarkably helpful when it comes to purchasing or producing content. Content is king, and Netflix is proving its ability to deliver successful content for a competitively low price to consumers.
  • Multiple Channels “People look at them as multiple channels. You saw that Amazon included us on the Fire TV and of course we’ve been before on the Kindle Fires and it's a great relationship all around where we have got unique content, they have got some unique content. They are also doing originals. There are multiple networks out there. It's very much not a zero-sum game and we are building this ecosystem together that's about Internet video and the more players there are in Internet video, the bigger that ecosystem gets. The big theme is Internet video is taking share away from linear video. So we are all participating in that transformation.” Netflix CEO Reed Hastings
  • 2. Accelerating Growth Netflix added 4 million members during the first quarter of 2014, which brings the total base to 48.35 million global subscribers. Growth is accelerating, as this is a considerable increase from the 3.05 million members Netflix added in the first quarter of 2013.
  • Still Growing Substantially in the U.S. Even in a relatively mature market such as the U.S., growth is accelerating. The company gained 2.25 million members in the U.S. during the first quarter of 2014, for a total of 35.67 million U.S. members. This compares favorably against 2.03 million net additions in the first quarter of 2013, and it shows that growth is still accelerating in Netflix's main market.
  • Ample Room for International Growth Netflix gained 1.75 million new international members in the first quarter of 2014, reaching a total of 12.68 million international members. This is an acceleration versus 1.02 million new international members in the first quarter of 2013. The company is still in its initial stage when it comes to international expansion.
  • 3. Expanding Profitability Content costs are expensive, and Wall Street analysts have always been concerned about the company's ability to operate profitably. However, revenues are clearly outgrowing expenses and profit margins are increasing. Management expects growing profit margins both in the U.S. and international markets in the medium term.
  • Rising Contribution Margin Netflix
  • Foolish Takeaway Netflix is consolidating its competitive strength via content differentiation. Growth is as strong as ever, both in the U.S. and in global markets. Profit margins are consistently moving in the right direction. Rapid sales growth in combination with increasing profit margins should provide a double boost to earnings in the years ahead.
  • The $2.2 trillion war for your living room can be a huge opportunity for investors. Do you know how to profit from it?