Netflix (NASDAQ:NFLX) is the world’s premier full-length features streaming company. Granted, there may be competitors, but that doesn’t change the fact that they’re taking on a giant. That has been most of the challenge with NFLX stock this past year … the market’s “concern”. It’s concerned that Disney (NYSE:DIS) is getting in the game and NFLX gave up Marvel content. It’s concerned that Hulu is growing and DIS has consolidated its hold on that streaming service.
And if it’s not concern over potential competitors taking market share, it’s concern about getting more subscribers. Or price points on subscription. Or the volume of original content. Or the lack of volume of original content.
The point is, this kind of damned-if-you-do or damned-if-you-don’t attitude in the market isn’t unique or unusual. Many disruptive companies have been through this.
You have to remember that for all the algorithms and program trading in the markets these days, analysts and financial leaders are still people. And people view things from a subjective lens, even numbers.
You see this all the time in the broader markets. China and the U.S. break off trade negotiations but the market rallies because the president said everything is going to be fine. Slow economic numbers come out, but the market rallies because Federal Reserve Chairman Powell says if the economy tanks because of the trade war the president said isn’t a big deal, he’ll lower rates.
The point is, these folks view the markets and stocks through a subjective lens and then investors follow along for the most part.
Years ago, another disruptor, Amazon (NASDAQ:AMZN), wasn’t getting much respect on Wall Street because it didn’t stow its cash for a rainy day or distribute it in the form of dividends like most of the other publicly traded companies had done for ages.
Bottom Line on NFLX Stock
Every quarter, the earnings were above expectations and the market always found a reason to temper its enthusiasm. Until the powers that be didn’t, and got on board. Now there are few on the Street who would say a bad word against the company.
NFLX stock is going through the same silly thing now. Analysts keep saying that the company can’t keep up subscriber growth or expand earnings. And it does.
When earnings were released, it impressively beat earnings and revenue expectations as well as subscriber growth. But then it was about its guidance for the rest of the year, which was positive, but the Street deemed it “light”. Netflix stock sold off 1% after hours.
But NFLX isn’t in China, so the trade war isn’t an issue, unlike say, DIS. And NFLX only does content, so it doesn’t have scores of spinning plates like AMZN. It’s focused. And it’s doing very well.
But given the market’s dour view of the firm right now — although it’s up almost 30% year-to-date — my Portfolio Grader has it as a C. My view is, another solid quarter and today’s prices will look like a great entry point in hindsight.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.