Netflix: Home theater
Netflix, Inc. (NASDAQ:NFLX) is the newest of these companies and came to revolutionize the way of watching movies and TV shows. However, it already holds roughly ¼ of the U.S. market share, exceeding 29 million subscribers (up about 6 million year over year) and holds over 7 million other affiliates overseas (a figure that was less than half last year). With easier and cheaper access to international markets and plenty of original content, Netflix, Inc. (NASDAQ:NFLX) seems poised to outperform its peers in the entertainment business, delivering an amazing service for relatively low fees.
This last feature is probably one of the company’s strongest points. Its pricing power seems so strong that price upsurges will almost certainly result in larger incomes; even if people were to respond poorly to little ($2 to $4) upsurges in subscription fees, which hasn’t been the case in the past, the firm would still collect massive profit gains that could create a 2,000% upsurge in earnings, to $10-$20 per share.
Expected to deliver growth rates around 20% over the upcoming years, I´d say that this stock is still a buy, even in spite of its extremely high valuation. Its business model is simple and profitable, and even in the worst of cases, revenue will continue to increase for a few years yet. Another initiative expected to drive growth over time is the firm´s incursion into the mobile and tablet segment, which has already proven quite profitable (but is still in its early stages).
Although some analysts are concerned about increasing competition and low barriers to enter the industry, I believe that Netflix, Inc. (NASDAQ:NFLX)’s brand name will help it prevail over its peers and continue to expand globally. Aggressive international expansion plans are being implemented as well, providing further development prospects, especially in Latin American, Caribbean, British and Nordic markets.
Bottom line
Although overvalued in relation to its peers, I like TiVo Inc. (NASDAQ:TIVO) and, especially, Netflix, Inc. (NASDAQ:NFLX). Providing sophisticated multimedia broadcasting systems to a market with ever-increasing demand, these firms are poised to deliver above average growth rates, outperforming conventional competitors like cable TV and satellite TV operators. I’d say BUY AND HOLD upside should be plenty in the upcoming years.
Victor Selva has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article The Rapid Evolution of the Home Entertainment Industry originally appeared on Fool.com.
Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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