Which Netflix doesn’t want to happen. It’s amazing that the firm is profitable, yet there it is. I like Netflix as an investment, but I’m concerned about the high growth and P/E. Putting your money in Netflix, Inc. is still a risky move, not only for the high valuation, but because the streaming industry is still growing and changing. It means that money placed in Netflix – or any streaming company – is hideously vulnerable to industry risk. Only put the 5% of your portfolio set aside for risky plays into Netflix, not the 60% that’s allocated to steady investments.
On the flip side of this equation is the deal Viacom has with Amazon.com, Inc. (NASDAQ:AMZN). Last February, Amazon and Viacom announced a licensing deal wherein Amazon Prime members got access to Viacom’s TV content – including stuff from Nickelodeon, MTV and other cable channels – as a part of their membership. It’s a good deal for consumers.
Amazon: no-fly zone
| 12 Month Growth | P/E | EPS | Div Yield | Net Margin |
| 9.4% | n/a | -0.20 | n/a | 0.2% |
Let’s get this in the clear: I love Amazon.com, Inc. (NASDAQ:AMZN) Prime and the rest of Amazon’s streaming service. The business model, where an annual subscription payment gets you access to a lot of content mirrors, is what Netflix is doing. However, there’s also the a la carte video rental service, where customers can just see a movie once for $2 or so. The combination of the two offerings is well done, easy to use and cheap enough to make useful to the average household. I can’t say enough about it.
However, that might be the only thing I like about Amazon.com, Inc. (NASDAQ:AMZN) as a company. I think the shares are overvalued and unlikely to justify an investment over time. The company has been making it with investment dollars and low – or no – profitability for too long to keep it up all that much longer.
I think it’ll have trouble if someone else comes along and enters the sales market with a significant (monetary) commitment. Given all those things – and its own prediction that it might make $10 million or lose $340 million next quarter – makes Amazon a strict no-fly zone for investors.
Streaming the future
In the end, I think Viacom, Inc. (NASDAQ:VIAB)’s spike in ad revenue from Nickelodeon is a helper, not a game changer. Streaming – though still a developing thing – is clearly the coming thing. How Viacom adapts to it will indicate the company’s long-term profit potential. Watch for that, and see where it goes after you put your money into it. It’s worth an investment.
Good luck!
The article A Nick in Time: Viacom, Ads and Streaming originally appeared on Fool.com is written by Nate Wooley.
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