Streaming giant Netflix (NASDAQ:NFLX) reported fourth-quarter earnings on Thursday, Jan. 17, which were largely better than expected. Although revenues missed, the company beat everywhere else it mattered. Earnings topped expectations. Subscriber growth came in ahead of expectations. The guide was pretty strong. Overall, the report was rock solid, yet Netflix stock dropped 4% following earnings. But, that drop requires context to fully understand what NFLX is going through now.

Heading into the print, Netflix stock had rallied more than 50% over the past month. Even after the minor post-earnings selloff, the stock is still up nearly 30% year-to-date.

From this perspective, investors shouldn’t take too much away from the fact that NFLX stock dropped after earnings. Instead, the takeaway is that the report was good enough to largely sustain a red-hot 50% rally over the past month.

What made the report so good? Broadly speaking, there were five big takeaways from Netflix’s earnings that confirmed the long-term bull thesis for Netflix stock. Those takeaways also largely dismantled the bear thesis. Thus, at this point in time, there’s no longer of a discussion of whether NFLX is a winning company. It most certainly is. Instead, the discussion now revolves entirely around price and valuation, and that’s a huge step forward for bulls.

User Growth Is Accelerating

The trend is as clear as day. Netflix continues to add more users ever year.

Global paid net adds in 2015 were just over 16 million. That number rose to 18 million in 2016, and just under 22 million in 2017. In 2018, global net adds numbered nearly 30 million. Moreover, the first quarter 2019 forecast calls for 8.9 million global paid net adds, which equates to more than 35 million net adds on an annualized basis for 2019.

Overall, Netflix’s user growth is only accelerating. The interpretation here is twofold. One, the addressable streaming market globally is growing by leaps and bounds as cord-cutting goes global. Two, Netflix remains the go-to choice and leader in this market due to compelling original content. As such, so long as cord-cutting trends persist and Netflix continues to pump out great original content, the platform will continue to add more users.

Screen Time & Share Is Rising

There are plenty of concerns out there regarding streaming competition for Netflix. But, that competition doesn’t have any negative impact on Netflix’s engagement metrics.

Not only is user growth seemingly unfazed by competition, but Netflix’s screen time and share is only rising. The company’s new original movies and series are now consistently netting north of 40 million household views in their first four weeks, including 80 million views for Bird Box. Moreover, Netflix’s U.S. TV screen share has risen to 10%, which is pretty amazing considering the standalone streaming service isn’t even ten years old yet.

Overall, Netflix continues to grow its presence within the streaming and entertainment markets. This expanded presence is happening at the same time that competition is becoming stiffer than ever. Thus, it is reasonable to conclude that competition will not have a negative impact on Netflix for the foreseeable future.

Margins Are Set to Keep Improving

The one glaring weakness in the earnings report was a weak Q4 operating margin, due to a shift in content spend.

But, that’s a near-term phenomena. In the big picture, operating margins came in at 10% this year, up from 7.2% last year. Price hikes are expected to push ASPs higher in 2019, and that in turn will pull up margins. As such, operating margins are expected to expand another 300 basis points this year to 13%.

Overall, Netflix is at a point where high operating leverage is starting to kick in, and each new global paid net add is additive to margins and profits. This dynamic coupled with price hikes will keep margins on a consistent upward path over the next several years.

The Worst of the Cash Burn Is Over

Another one of the big bear arguments against Netflix stock is that the company burns a bunch of cash every quarter. That negative, too, appears to be moving into the rear-view mirror.

Fiscal 2017 free cash flow wasn’t pretty at a loss of $3 billion. But, management said in its letter to shareholders that peak cash burn is here. Next year, 2019 free cash flow is expected to be another loss of $3 billion again. Then, in every year thereafter, management expects free cash flow to improve due to rising operating margins.

Overall, Netflix has been a big cash burn company for a long time. That’s because the company is using huge content spend to drive robust user growth. It’s working. Big content spend is driving big user growth, and those users are sticking around through price hikes. Thus, the ROI of huge content spend is immensely positive, and it’s only a matter of time before the company reaps the rewards of that content spend through positive cash flow. It looks like this will happen within the next few years.

The Young Love Netflix

Younger consumers around the world love Netflix, and that has become increasingly clear over the past two quarters.

In the third-quarter report, Netflix released Instagram metrics on its stars for the first time. Netflix did so again in the fourth quarter. The data essentially shows that many of the young stars in Netflix originals were relative nobodies before they starred in a Netflix show. Afterwards, they turned into major stars with huge global followings.

The broad takeaway is that, due to the company’s global reach among younger consumers, Netflix is turning into a global launching pad for a new generation of stars. That’s big. It means tomorrow’s biggest consumers love Netflix because they are discovering new and exciting talent through the platform. It also means that tomorrow’s brightest talent has an affinity for Netflix because, as the old saying goes, there’s nothing like the first time. This “young love Netflix” dynamic will keep Netflix stock on a winning path for a lot longer.

As of this writing, Luke Lango was long NFLX.