Netflix, Inc. (NASDAQ:NFLX) shares were boosted by 1.61% at the end of last week because the company is going to be listed on the NASDAQ 100 index. Generally speaking, when a company is listed on a new index it increases the value of the stock because index-following funds will increase the amount of exposure they have to the stock.
The NASDAQ 100 represents the 100 largest non-financial companies by market capitalization. The stock will be officially listed on the NASDAQ 100 on June 6, and will be replacing Perrigo Company (NASDAQ:PRGO) (a healthcare company).
I am hugely optimistic on Netflix
The company is successfully ramping up the number of its subscribers, and the company is on track to grow earnings as the contribution margin (marginal profit per unit) has gone up. The reason marginal profit per unit is going up is because Netflix, Inc. (NASDAQ:NFLX)’s movie streaming business is operating at even larger economies of scale. The company’s contribution margin has increased from 14.3% in the first quarter of 2012 to 20.6% in the first quarter of 2013. The growth of Netflix is contingent on the company’s ability to secure high quality content and win subscribers, which is something Netflix has done very successfully throughout the course of 2012.
The international expansion strategy is growing at a steady pace. The international streaming segment was able to add a million subscribers quarter over quarter, according to the latest earnings release. The $8 price point seems very effective in foreign markets.
Michael Dell moves the newsroom
Dell Inc. (NASDAQ:DELL) is still trying to convince shareholders to take Michael Dell’s deal. For whatever reason, the company seems heavily biased towards Michael.
Dell Inc. (NASDAQ:DELL) is on track to either being bought out or issuing a special one-time dividend, as both Carl Icahn and Michael Dell go head to head to come up with a deal that investors favor. In its latest press release the company is sticking with the $13.65 deal made by Michael Dell. The stock rallied by 25% since the announcement of the deal, and the management team feels that it has done its part in providing investors with a good deal.
I personally favor Carl Icahn’s special dividend proposal. The analysis is pretty long, but I assume that the combined value of the dividend and the floating stock price will amount to $18-$20 per share. To get a full understanding of this, I highly recommend you read my article that explains step by step what the special dividend means. I personally favor that deal because it has the potential of fully exploiting the maximum return possible for investors.
Hewlett-Packard (NYSE:HPQ) still a compelling investment opportunity
Now I know many of you are thinking that the desktop computer is on its way to its coffin, but, on the other hand, we have to acknowledge the future potential of desktop computers over an even longer time frame.
Right now it seems that Dell Inc. (NASDAQ:DELL) may actually exit the market for computing devices in favor of its more lucrative software and enterprise business. In Microeconomic theory (under the assumption of perfect competition), the effects of an exit will involve a reduction in the production of goods and services along with an increase in the price. So for the remaining firms that are able to stick around (Apple Inc. (NASDAQ:AAPL), Lenovo Group Limited (PINK:LNVGY), and Hewlett-Packard Company (NYSE:HPQ)) the average selling price of computers may actually go back up, but the total quantity of computer shipments will go down. It all comes down to which firms will exit and which stay.