Netflix Report

Netflix is a BUY Netflix is constantly adding diverse and original content Netflix continues to increase their investments in original content. Forecast from BMO Capital: Netflix will lay out an estimated $17.3 Billion in cash for original content this year, already a $2 Billion increase from last year.  By 2028, there will be a projected $26 Billion spent on original content, which means that the variety and quality of content will only continue to grow, which provides the opportunity to attract more people to join Netflix.  This increased investment has led to a direct increase in the number of subscribers year after year, as it has more than doubled its subscriber base from 2016 from approximately 94 million to over 190 million subscribers by the second quarter of 2020.  An increased spending in original content has and will continue to provide a strong competitive advantage, which allows netflix to enhance it’s pricing power in the long term.   Continuation and popularity of near-term original content is encouraging The number of returning shows and overall content increases every year.  The service released 371 new TV shows and movies in the US in 2019, which was a 54.6% increase from the 240 shows and movies released in 2018. Netflix Original Content Strategy In addition to dedicating more investments into their original content, Netflix is committed to increasing the presence and influence of their original content in the TV and Film industry in general.  For example: In 2019, the Netflix original comedy “Murder Mystery” topped the list of the most popular releases of the year, and original shows such as the third season of “Stranger Things” came in second.  Bolsters the company’s desire to keep investing in original content, as it now knows that it can keep subscribers interested, even if it loses some third party blockbusters to newer streaming services.  This also provides an advantage over its competitors as Netflix has an estimated 3x more in subscribers and exposure than its competitors. Provides possible long term stability:  Even if subscriber growth does begin to slow down, Netflix will have already become such an influential entertainment industry that it will have gained a very large portion of the TV and film/entertainment market share, providing it opportunities to continue to grow in ways other than consumer outreach.  International Growth Netlflix’s best growth came from its Asian-Pacific region of subscribers. Contributed to about 46% of its growth. Netflix is able to customize user preferences to region, adding shows relating to various user interfaces. In turn, international subscribers have gone from approximately 27.4 million to 122 million. Popularity in countries has risen to high subscription levels in international countries mainly due to customizable content and Netflix’s easy accessibility. Any subscriber will see an increasing set of viewership options pertaining to a non-American audience.  Without a doubt, turning to smaller markets in Asia yield significant potential. Even without China, the Asian-Pacific region hosts 2 billion people, a large population to tap into. Netflix also plans to experiment with mobile-only services for its international market (ex. India) due to the popularity of mobile phone use Additionally, Netflix is planning to triple its office space in the UK following a string of successes with added shows. Audience preferences in the UK area are similar to those of North America, making it easier to serve new subscribers. In the long term, establishment internationally will lead to higher yield and global attention while the company continues to deliver content that audiences enjoy in the short term. Growth of the overall industry/Decline of Cable TV Many streaming services are thriving and growing quickly due to the transition from traditional cable providers (ex: Comcast) to streaming services for convenience, large libraries, shows, and for savings. 5 CAGR (compound annual growth rate) of 20.4% from 2020 to 2027 for video streaming services compared to CAGR of 3.4% for cable providers  over the same time period. CAGR is compound annual growth rate and represents the “geometric progression ratio that provides a constant rate of return over the time period”, and is a figure used to show projected growth in an investment or an industry.  The monthly fee, convenience (via TV, mobile, digital media players) and name-brand recognition make it the first option over TV providers. Accessibility is one key advantage of the growing industry instead of cable TV. Pandemic life has accelerated TV-watching and indoor activities at all times, which have pushed people towards accessible, on-demand entertainment that streaming services provide, rather than live TV. With the abundance of customers shifting to this industry, Netflix has a reputation advantage over others. Netflix’s penetration of OTT (over-the-top, bypassing cable) households at 75%.This compares to 55% for YouTube, 44% for Prime Video, and 32% for Hulu. Netflix launched streaming video in 2007 and was the first to pivot from physical DVD subscriptions to live streaming. Netflix has even passed DVR as TV viewers’ default source for programming, second only to live TV, and far ahead of any other streaming service (more than double the percentage of Hulu), increasing among younger viewers, showing a shift in purchasing trends benefitting Netflix more than any other streaming platform.

back
photo-url-https://lh3.googleusercontent.com/a/AATXAJzpLUsv7juUdUcpk9I6k2E_aurK2v47mH5xBos4=s96-c

akhilpnbc

May 9, 2021

16.42%

Change % Since Posting

503.84

Price When Posted

82.75

Change Since Posting

NFLX

NetFlix Inc

586.59

3.72
0.64%
Current Price

Netflix Report

bullish

Netflix is a BUY

  • Netflix is constantly adding diverse and original content
    1. Netflix continues to increase their investments in original content.
      1. Forecast from BMO Capital: Netflix will lay out an estimated $17.3 Billion in cash for original content this year, already a $2 Billion increase from last year. 
      2. By 2028, there will be a projected $26 Billion spent on original content, which means that the variety and quality of content will only continue to grow, which provides the opportunity to attract more people to join Netflix. 
      3. This increased investment has led to a direct increase in the number of subscribers year after year, as it has more than doubled its subscriber base from 2016 from approximately 94 million to over 190 million subscribers by the second quarter of 2020. 
      4. An increased spending in original content has and will continue to provide a strong competitive advantage, which allows netflix to enhance it’s pricing power in the long term.  
    2. Continuation and popularity of near-term original content is encouraging
      1. The number of returning shows and overall content increases every year. 
      2. The service released 371 new TV shows and movies in the US in 2019, which was a 54.6% increase from the 240 shows and movies released in 2018.
    3. Netflix Original Content Strategy
      1. In addition to dedicating more investments into their original content, Netflix is committed to increasing the presence and influence of their original content in the TV and Film industry in general. 

 

  1. For example: In 2019, the Netflix original comedy “Murder Mystery” topped the list of the most popular releases of the year, and original shows such as the third season of “Stranger Things” came in second. 
  1. Bolsters the company’s desire to keep investing in original content, as it now knows that it can keep subscribers interested, even if it loses some third party blockbusters to newer streaming services. 
  2. This also provides an advantage over its competitors as Netflix has an estimated 3x more in subscribers and exposure than its competitors.
  1. Provides possible long term stability:
    1.  Even if subscriber growth does begin to slow down, Netflix will have already become such an influential entertainment industry that it will have gained a very large portion of the TV and film/entertainment market share, providing it opportunities to continue to grow in ways other than consumer outreach. 
  • International Growth
  • Netlflix’s best growth came from its Asian-Pacific region of subscribers. Contributed to about 46% of its growth. Netflix is able to customize user preferences to region, adding shows relating to various user interfaces. In turn, international subscribers have gone from approximately 27.4 million to 122 million. Popularity in countries has risen to high subscription levels in international countries mainly due to customizable content and Netflix’s easy accessibility. Any subscriber will see an increasing set of viewership options pertaining to a non-American audience. 
  • Without a doubt, turning to smaller markets in Asia yield significant potential. Even without China, the Asian-Pacific region hosts 2 billion people, a large population to tap into. Netflix also plans to experiment with mobile-only services for its international market (ex. India) due to the popularity of mobile phone use
  • Additionally, Netflix is planning to triple its office space in the UK following a string of successes with added shows. Audience preferences in the UK area are similar to those of North America, making it easier to serve new subscribers. In the long term, establishment internationally will lead to higher yield and global attention while the company continues to deliver content that audiences enjoy in the short term.
  • Growth of the overall industry/Decline of Cable TV
    1. Many streaming services are thriving and growing quickly due to the transition from traditional cable providers (ex: Comcast) to streaming services for convenience, large libraries, shows, and for savings.

 

5

  1. CAGR (compound annual growth rate) of 20.4% from 2020 to 2027 for video streaming services compared to CAGR of 3.4% for cable providers 
  2. over the same time period. CAGR is compound annual growth rate and represents the “geometric progression ratio that provides a constant rate of return over the time period”, and is a figure used to show projected growth in an investment or an industry. 
  3. The monthly fee, convenience (via TV, mobile, digital media players) and name-brand recognition make it the first option over TV providers. Accessibility is one key advantage of the growing industry instead of cable TV.
  4. Pandemic life has accelerated TV-watching and indoor activities at all times, which have pushed people towards accessible, on-demand entertainment that streaming services provide, rather than live TV.
  1. With the abundance of customers shifting to this industry, Netflix has a reputation advantage over others.
    1. Netflix’s penetration of OTT (over-the-top, bypassing cable) households at 75%.This compares to 55% for YouTube, 44% for Prime Video, and 32% for Hulu.
    2. Netflix launched streaming video in 2007 and was the first to pivot from physical DVD subscriptions to live streaming.
    3. Netflix has even passed DVR as TV viewers’ default source for programming, second only to live TV, and far ahead of any other streaming service (more than double the percentage of Hulu), increasing among younger viewers, showing a shift in purchasing trends benefitting Netflix more than any other streaming platform.
Comments

Write your comment....

Sign in to comment

read-time
4 min

554.22

Target Price

7/ 10

Confidence

1-3 Years

Timeframe
catalyst icon
Earnings Release
catalyst icon
News
catalyst icon
SEC Filing
catalyst icon
Sentiment
catalyst icon
Other Catalyst

NFLX Channel

Start new chat
next