3. Netflix, Inc. (NASDAQ: NFLX)
Number of Hedge Fund Holders: 110
Netflix, Inc. (NASDAQ: NFLX) is an entertainment company based in Los Gatos, California. It is ranked third on our list of 10 best entertainment stocks to invest in. The stock has returned 5.56% to investors over the course of the past year. On April 20, Netflix, Inc. (NASDAQ: NFLX) posted earnings for the first quarter of 2021, reporting earnings per share of $3.75, beating estimates by $0.76. The revenue over the period was around $7.16 billion, up 24.2% year-over-year.
At the end of the first quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $14.16 billion in Netflix, Inc. (NASDAQ: NFLX), down from 116 the preceding quarter worth $15.63 billion. On July 7, Truist kept its Buy rating on Netflix, Inc. (NASDAQ: NFLX) with a $600 price target, arguing that Netflix, Inc. (NASDAQ: NFLX) has options to expand its services into podcasts and live sports as well as to consider an ad-driven revenue stream.
Polen Focus Growth Fund, in its Q1 2021 investor letter, mentioned Netflix, Inc. (NASDAQ: NFLX). Here is what the fund said:
“We purchased Netflix in March, initiating a 3% position in the Portfolio. We believe Netflix is a highly competitively advantaged company. It has recently met all our investment guardrails, and we anticipate it will remain sustainably above our guardrails over the next five years and beyond. We know Netflix for its ubiquitous streaming service and deep library of owned content. The company has made investments in this content (currently running at nearly $20 billion/year), generally keeping subscribers highly engaged and loyal to their service. The company has number one market share in 99% of markets globally, but it is our view that video streaming on-demand is still an underpenetrated space with many years of attractive growth likely ahead. The service is also relatively affordable at roughly $11/month on average globally.
We believe Netflix’s growth in content spend is beginning to moderate, which could allow margin expansion to continue for many years when paired with ongoing subscriber growth and price increases. While there is competition from the likes of Apple (Apple TV+), Amazon (Prime Video), Disney (Disney+ and Hulu), and others, we believe there can be a handful of winners in this industry. Already, we see many people subscribe to multiple streaming video services, with Netflix being their “anchor” service. That said, the barriers to entry are high, and we believe they are getting higher given the substantial amount of capital and size of the subscriber base required to maintain a competitive service for both viewers and content producers. Over the next five years, we expect Netflix’s earnings growth to be approximately 30% annualized and free cash flow to grow at an even higher rate.”
