Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member., Inc. (AMZN): Is Now the Time to Sell Netflix, Inc. (NFLX)?

Page 1 of 2

After back-to-back days of hitting all-time highs, shares of Netflix, Inc. (NASDAQ:NFLX) opened below the previous high-water mark established two summers ago.

A pair of analysts — Morgan Stanley’s Scott Devitt and BTIG’s Richard Greenfield — thinks that it may be time to take profits. They lowered their ratings on the leading video service provider today. Neither is necessarily concerned about the model or Netflix, Inc. (NASDAQ:NFLX)’s prospects. It’s primarily a valuation call, and it’s hard to blame them. Netflix shares have soared 439% over the past year through yesterday’s close.

Netflix, Inc. (NASDAQ:NFLX)Has Netflix, Inc. (NASDAQ:NFLX) grown that fast? Of course not. Revenue has only grown 20% over the past year, fueled by a 36% spike in streaming subscribers that’s been offset by a decline in folks paying more for disc-based plans.

Naturally, this doesn’t mean that Netflix shares should have risen just 20% over the past year. That starting point came at a time when things looked bleak for the company. It’s a whole new world now. This year has treated Netflix to Emmy nominations across three of its original shows. A year ago, it seemed as if Netflix, Inc. (NASDAQ:NFLX) was vulnerable to competition from, Inc. (NASDAQ:AMZN) and whoever would buy Hulu, but there’s no one visible in its rearview mirror these days. Netflix has 37.6 million streaming customers, and no one is likely to get close.

There are also some pretty spectacular things happening at Netflix, Inc. (NASDAQ:NFLX) as we work our way down the financial statements. Revenue may have climbed just 20% in its latest quarter, but earnings per share more than quadrupled. Margins are improving dramatically as the model scales. Losses overseas are narrowing, and the contribution profit of its domestic streaming business has climbed 74% — or nearly three times the 26% top-line advance.

Earnings are expected to more than quadruple this year and then more than double to $3.33 a share come 2014. Of course, this doesn’t make Netflix cheap at more than 90 times next year’s earnings. It’s no bargain at 45 times 2015 times projected earnings and 36 times 2016’s profit target.

However, fat forward multiples don’t tell the whole story here. Just as investors have forgiven, Inc. (NASDAQ:AMZN)’s lack of near-term profitability, the market understands what Netflix, Inc. (NASDAQ:NFLX) is doing. It’s building a moat that’s far larger than skeptics have given the company credit for.

“Your margin is my opportunity” is a great line attributed to, Inc. (NASDAQ:AMZN) CEO Jeff Bezos, and that’s what Netflix has been doing as it pays up for content and takes hits overseas while it grows its truly global business.

Yes, global. The Netherlands became Netflix’s latest new market this week.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!