Pat McKeough responds to many requests for specific advice on what stocks to buy and other questions on investment strategy and the economy from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.
This week an Inner Circle member asked us about the popular online movie and TV service Netflix. A pioneer in sending DVD’s by mail and offering online entertainment at a low monthly fee, the company has seen its share price rocket by over 360% in less than a year. Pat examines the company’s aggressive thrust into producing original content as it seeks to maintain its dominant position in an increasingly competitive industry.
Q: Hi Pat. What is your opinion of Netflix? Thank you.
A: Netflix (symbol NFLX on Nasdaq; www.netflix.com) is the largest online entertainment subscription service in the U.S, with over 100,000 DVD titles for rent.
The company has various subscription plans—including monthly plans starting at $4.99—that let users stream movies or rent DVDs with no due dates or late fees. The company’s distribution centres across the U.S. allow most subscribers to get next-day delivery.
In the three months ended June 30, 2013, Netflix’s revenue rose 20.3%, to $1.09 billion from $889.2 million a year earlier. Excluding one-time items, the company earned $0.49 a share, up from $0.11.
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Netflix shares have gained over 364% in just 10 months
Netflix holds cash of $1.1 billion, or $19.61 a share. Its $500.0-million long-term debt is a low 3.5% of its $14.4-billion market cap.
The company has made an aggressive push into producing original content, including shows like House of Cards, Hemlock Grove and a new season of Arrested Development. Netflix hopes to keep its subscribers loyal by providing shows they can’t find anywhere else.
Netflix’s shares have gained over 364% since September 2012.
In the Inner Circle Q&A, Pat looks at Netflix’s earnings outlook and whether it can continue its strong growth as it seeks to maintain its dominant position in a competitive and growing business against rivals like Amazon and HBO. He concludes with his clear buy-hold-sell advice on the stock.
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members
Given the radical changes in the way people watch TV and movies—not to mention the growth of video games—do you think any stock in the industry is a really good investment over the next decade? Let us know what you think.
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