Netflix, Inc. (NFLX): A Stock Worth The Risk – Amazon.com Inc. (AMZN), Facebook Inc (FB)

Page 1 of 2

Netflix, Inc. (NASDAQ:NFLX) is one of the leading names in the TV streaming industry, along with other players including retail giant Amazon.com, Inc. (NASDAQ:AMZN). Not only is Netflix, Inc. (NASDAQ:NFLX) making headlines with the latest shows like “House of Cards,” it has also made some headlines in the stock market with relatively mixed opinions. The internet streaming industry is huge; however, only one player is likely to dominate the market in the coming years. Netflix currently leads the market with its massive consumer base, while Amazon finds itself growing and expanding at a very fast rate.

Facebook Inc (FB)

Valuation

With a market capital of over $10 billion, Netflix, Inc. (NASDAQ:NFLX) is currently trading between $180 to $190. The stock has seen a whopping 200% growth compared to last year’s $60 valuation in November. The company’s stock rose nearly 50% in January after it reported Q4 earnings, where a net income of $8 million surpassed Wall Street estimates.

(Source:Yahoo! Finance)

Even though Netflix, Inc. (NASDAQ:NFLX) was able to perform well, in terms of profitability, compared to what analysts were predicting, its revenue declined significantly, mainly due to the decline of its DVD division. The company’s sky high P/E ratio might lead to people believing that its an overvalued stock; however, the company has a massive growth opportunity, and some investors would think that taking a risk is worth it, if the stock can rise in similar fashion.

Amazon, on the other hand, is currently trading between $260 and $275.

(Source: Yahoo! Finance)

The retail giant’s valuation is primarily based upon its various other divisions, with Prime streaming being a relatively small division with great potential. Amazon’s stock, after their last earnings report, hasn’t been able to grow well, mainly because the company recorded losses for the quarter. The company might not be a good short term investment, but it promises to be a wonderful investment for patient long-term investors. Jeff Bezos, Amazon’s CEO, recently said that the company is investing in long term projects that will show significant revenue and profit growth in the future. Investment for the long-term means that the company won’t be able to show profits in upcoming quarters.

Netflix: The Good

Netflix has very decent growth potential, and I won’t be surprised if the stock hits the $300 mark again. Some analysts are claiming that Netflix’s good days are behind the company and that upcoming years will see a decline. However, the company’s brand name is so huge that I just don’t see it happening.

Netflix, in economic terms, has the first player advantage. Economic theory suggests that the first player has a chance to dictate the market; which is what Netflix, Inc. (NASDAQ:NFLX) has done. It has captured most of the market with a huge customer base. Also, Netflix has managed to release a lot of different titles for its streaming service. The reason why Amazon might not be a true competitor–it may not be able to get a big enough share of the market due to Netflix’s extensive video library.

The recent Facebook Inc (NASDAQ:FB) deal is seen as another crucial point for Netflix’s future success. The company recently announced that it had entered into the social media space by integrating its streaming service with Facebook. The latest integration means that Netflix subscribers will be able to share content with others, view what their friend’s like and get a “social networking” experience while using the streaming service. Reed Hastings, Netflix’s CEO, believes that the Facebook integration is a crucial factor in Netflix’s future growth as the company plans to grow its brand name even further.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

Subscribe

Enter your email:

Delivered by FeedBurner

X

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 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!