Why Netflix, Inc. (NFLX) Is Still on the Rise

Amazon.com, Inc. (NASDAQ:AMZN) competition

Netflix’s biggest competitor is Amazon.com, Inc. (NASDAQ:AMZN). For a yearly subscription of $79.99, customers have access to Amazon’s streaming library of 38,000 TV shows and movies, a Kindle library, and free two-day shipping for Amazon products. While it is cheaper than Netflix, its streaming library is only slightly over half Netflix’s size. Of Netflix’s top 200 titles, Amazon only has 74, further separating the two competitors’ libraries.

Amazon is in the process of releasing original content to compete with Netflix. Launched in 2010, Amazon Studios is currently developing 24 movies that are being tested with audiences. The company also has 5 original TV shows premiering later this year and early next year. These shows include Alpha House, Betas, Annebots, Creative Galexy, and Tumbleaf. With these new shows, Amazon hopes to replicate the success of House of Cards.

Netflix has a dominant market share of compared to Amazon. The company has 89% of all television streams compared to Amazon’s 2%. Amazon and Netflix have P/E ratios of 89.27 and 73.24 respectively which shows investor’s confidence in the two companies’ growth. Netflix has a higher gross margin of 27% compared to Amazon’s 25%. Netflix is currently winning the streaming competition, but this battle is only just beginning.

Conclusion

Internet television is the future of entertainment and Netflix is leading this high growth industry through content and customer convenience.  Exclusive and original content will allow the company to continue to increase membership and drive earnings growth.  The company is still laying the foundation for its international business but it will be a large source of profit for Netflix in the future. With Netflix’s potential, I only see earnings going up from here. I think Netflix’s stock and service are both a buy.    

The article Why Netflix Is Still on the Rise originally appeared on Fool.com and is written by Ben Popkin.

Ben Popkin has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, DreamWorks Animation, and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Ben 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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