Netflix's (NFLX) assets have grown by about 6% over the past year. If compared with the S&P 500, this figure was 26% over the same period. The completely non-dynamic paper of the streaming video giant took only second place among the weakest members of the FAANG group, only a drop ahead of Amazon. Is there a real possibility that the asset will go up sharply and show its own result in 2022, which differs by an order of magnitude in a positive direction from last year?
This probability is quite real! Today, there has been a slight change in the direction of investors' interests in the market. The fact is that the latter began to gradually abandon the shares of fast-growing tech giants with speculative inclinations. In this regard, it is worth paying attention to a stable and very promising enterprise in terms of planned financial success.
Increasing the number of subscribers
A serious indicator of the true state of affairs at the enterprise is considered to be a systematic, but constant increase in the number of its subscribers. In the 2nd quarter of last year, 1.5 million people joined the company, in Q3 this figure was 4.4 million users, which is the largest parameter since 2020.
After a high jump in financial indicators in 2020, the weak results of last year somewhat annoyed investors. Many have decided that the company's growth has now stalled for a long time, and very soon the company will become one of the losers of the second plan. However, the sharply increased indicators in the 3rd quarter brought back hope that all is not lost yet, and the streaming service has a wide road ahead.
Taking into account the calculations carried out by the management of Netflix, by the end of the 4th quarter, the number of active users of the company's services should reach 8.5 million people, which corresponds to 8.5 million attracted over the same period the year before last. If the company manages to maintain these rates of development further, then every quarter the company will receive up to 8-9 million new subscribers.
The positives of Netflix
Now let's talk about the advantages that no company competing with Netflix has. First, about profitability. So the company's option margin in 2022 should be above 2% of sales. This is almost 2 times more than in the previous one.
The company's assets are being sold today with a forward profit of 47, which makes the issuer the second most expensive in the FAANG list. The first in this list is Amazon with an indicator 54 times higher than the forward profit.
Another nuance is the high free cash flow by all standards, which just stimulates the growth of the paper to further heights. The company expects to receive a positive cash flow for the first time in a long time.
The financial director of the company, S.Neumann, says that in the very near future we can count on this indicator at the level of 15% of sales. This amount is even more than the world's largest issuers receive, for example, Disney. From these funds, it is planned to launch a repurchase of assets from the exchange, as well as spend on increasing the dividend payout.
Is Netflix growing?
The company finished the third quarter of 2021 in September. At this point in time, the company already had about 214 million paid and active users on its account. By comparison, the issuer completed Q3 2020 with a similar indicator of 195 million. It is expected that by the end of the 4th quarter of this year, the number of subscribers will be 220 million.
Many consider Netflix to be the ancestor of the streaming video service. The content offered by the company instantly became popular, and the number of interested users began to grow rapidly. The pandemic stimulated this process, because at the time of the lockdowns, millions of people were chained to TV screens and enjoyed watching really high-quality videos. It all cost some $20 a month. It should not be surprising that during this period the number of subscribers has soared significantly.
This is the secret of the company's development and high financial performance – providing high-quality content for little money. Moreover, the subscription price may vary depending on the country. The company offers its users programs, movies, videos for every taste and predilection. These are not only pictures of world film companies, but also series of their own production, which have already gained popularity in the world.
Only on September 19 last year, the company received 44 Emmy Awards from the Television Academy – this is many times more than all the others who participated in the award.
To watch Netflix content, it's simple enough to have your gadget connected to the Internet. At the same time, the image quality remains consistently high. These advantages will remain in the future, so the company is waiting for only bright prospects for attracting an increasing number of customers.
Today, the main goal of the streaming service is considered to be 30 billion in revenue per year. Over the three quarters of last year, the company spent $12 billion on improving its own content. If we compare with the same period last year, $8.5 billion was spent on the same needs.
These sums allowed the creation of several blockbusters, for example, the multi-series Squid Game, which has already been watched by 142 million families. It is very noteworthy that the company does not need to spend money on advertising, since word of mouth in social networks and personal communication of subscribers performs this moment for it. The company has spent years to form its own big name, and now it deservedly rests on its laurels.
It is noteworthy that the company's business is growing, and its assets are relatively inexpensive. Judging by the state of the price to profit, which shows a ratio of 55, then, since 2012, this is the minimum cost.
The enterprise has reached such a scale today that it is difficult and expensive to compete with it. The company offers excellent service in comparison with alternatives at the most favorable price. Today, the value of assets is quite attractive to buy.
Despite this, it is not recommended to purchase an asset now, while sellers still hold the palm. There are no signs of a reversal yet, but it's worth refraining from buying.