Week 12: Closing Time

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Well folks, this is the end.

Yes, after twelve long weeks of covering the streaming giant Netflix, my reign as analyst will be coming to a close. The semester is wrapping up, and it’s just about time for me to throw in the towel on this escapade.

I would like to first thank all of you for coming on this journey with me. I know at times it has been a struggle, but I have learned a lot along the way, and I hope you have too.

As a way to sum up my experience, I would like to discuss some of the lessons I learned during this journey with Netflix. It has certainly been a wild one, full of surprises and unpredictable jumps and drops. Nonetheless, it has taught me more about a company that has undeniably impacted my life and will certainly be prevalent in the future.

So let’s get into it:

Lesson 1: Expansion

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Netflix’s global expansion

One of the most consistent messages from Netflix was their expansion measures. Whether this was through deals with Viacom to be apart of an exclusive production agreement or in expanding into both the African and Indian markets, Netflix has had one goal in mind: grow at any cost. And by any cost, I mean any cost. Yes, Netflix is willing to take on $8 billion annually in order to expand its production efforts.

This expansion effort has taken a few different paths. Netflix has moved to make its own original content in the future, expanding its already diverse set of programs. This has taken the form of production agreements with companies in order to produce original content. It seems as though Netflix will eventually drop its existing licencing agreements in order to support its own ventures, changing from a streaming platform to an original content streaming platform. As an Office enthusiast, this movement makes me somewhat worried I might lose my favorite show, but it is still too early to make any assumptions.

Another way this expansion has occurred is in the form of international markets. Although it is still important to add domestic subscribers, Netflix’s push has been towards the international markets, specifically untapped markets with high human populations. These include both Africa and India, in addition to other Asian markets. Netflix has agreed to create programs specifically for these areas, employing its European offices to spearhead the operation. Netflix has been adding international subscribers at an increasing rate, demonstrating their success in expanding into foreign countries.

Lesson 2: Competition

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A few of Netflix’s competitors

There are many reasons for the aforementioned expansion, but one that cannot be understated is the importance of competition. Over the past twelve weeks of covering Netflix, I have witnessed the transformative effects of competition on an individual company as well as an industry.

Competition has definitely ramped up over the past few months. Disney recently announced the creation of its streaming service, Disney+, to compete with Netflix. This seems to have a similar platform as Netflix with a focus on children’s content. While it might not be a direct reaction to Disney+, Netflix signed a deal to animate Raul Dahl’s children’s novels, which could be viewed as an attempt to compete with the children’s programs industry.

Earlier this year, 21st Century Fox acquired British streaming giant Sky. This move demonstrates 21st’s desire to compete with Netflix and other streaming companies in the Euro sphere. Netflix has been consistently adding customers in Europe, and hence, other streaming services need to compete with them. This increased competition is fun to watch as a consumer, for we get better packages and services for lower prices.

Lesson 3: Authenticity

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One of the things I’ve learned about Netflix during my time covering the stock is its commitment to authenticity. While Netflix is by no means a transparent organization, it does its best to stay true to its roots. It starts with CEO Reed Hastings, who I analyzed as a “non problematic CEO.” This man simply silently grinds away, finding new ways to innovate and expand his company.

It continues with Netflix’s somewhat ruthless style of peer evaluation. Using a 360 review, employees are held to the highest standard and are subject to harsh criticisms from those around them. This seeks to avoid sugar coating and gets at the core of what it means to be a good employee.

Another example of this authenticity is Netflix’s avoidance of ads. Earlier in the year, the streaming giant dabbled with the idea of adding ads between shows to fund its expansion. However, after a pretty significant rejection from the public, Netflix decided to keep its traditional ad-free streaming.

Given what I’ve learned, would I want to work for Netflix?

If the opportunity presented itself, I would likely take it. Netflix fosters creativity and has a desire to expand and bring joy via streaming to people all over the world. There seems to be a lot of upward mobility for Netflix, and hence I would be interested in taking a job here. I would also be curious what it would be like to be apart of a 360 review, both as the one under review as well as giving feedback to my peers. I do see something similar to this at schools, where teachers are subject to student evaluations. However, this does not compare to the 360 review, for teachers do not seem to be graded by their peers or customers. I think it would be advantageous for me, as I would be able to have receive complete, candid feedback from those around me.

Now, investment is a different story.

When I first started covering Netflix, it was trading at $348.68. It is currently trading at $265.14. That’s a loss of 23.94% in only twelve short weeks. For most, that would be reason to not invest in a stock.

Now while this certainly factors into the investment equation, it is not the primary reason I would not invest in Netflix. Rather, I feel as though Netflix is growing too big too fast. In addition to being apart of the FANG stocks, a tech giant, and having a P/E of 91.62, Netflix has too much hype and not enough production. Their cash flow is very negative, and they seem to be spending money they don’t have. In addition, they are expanding far too quick, moving into many different markets that they have not test sufficiently. There is also mounting competition in the form of both large companies and small niche organizations and will only get worse.

All in all, I would have to pass on investing in Netflix.

It has been a pleasure and an honor to lead you all on this journey. Thank you for bearing with me. Netflix, thank you for being an exciting business to cover through its ups and down.

To my readers, good luck with your future investments. I hope they all turn out well.

As of now, this will be my last blog post for a while. But who knows, maybe sometime in the future I will return to Sernas’s Sunday Secrets with some new insight.

Signing off,

Sernas

 

Sources:

https://finviz.com/quote.ashx?t=NFLX

 

B2B Blog: First Impressions Matter

Good afternoon business career hopefuls.

I hope all of you have been making strides towards your career goals, utilizing the many resources here at Villanova. If for some reason you are struggling to start, maybe this blog will motivate you to get the ball rolling.

Applying to a job has many facets. There are interviews and references, among other things. However, there is one piece of paper that is arguably the most important part of this process. It it usually the first thing that businesses review as part of the application process, and thus, it can make or break an applicant’s chance to get the job. You guessed it: the resume.

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A resume is integral to the job process

Yes, this one, single spaced piece of paper is the first step in determining your fate in the application process. For those of you that have already written your resumes, you are aware of how painstaking this process is. Want to hear the best part? According to TheLadders, employers spend an average of six seconds per resume. Yes, six whole seconds.

So that begs the question: how does one craft a successful resume? Well, a few weeks ago I was fortunate enough to attend a seminar held by the Career Center called “How to Write a Winning Resume.” In this info session, I learned the keys to constructing a resume that not only grabs the attention of readers but might even make them linger for more than six seconds.

One of these keys was the importance of space. A resume should only be one page long, and hence, utilizing space properly is a necessity. The instructor recommended font 10-12; smaller text could be illegible. To squeeze all the applicable information, one must be organized and efficient with their space. It is important to plan before writing the resume. One way to do this is to brainstorm prior to writing the actual resume. This enables you to direct how you present yourself to your employers to ensure the best possible chance of landing the job.

Another important tip was to tailor your resume to the job at hand. It is important to have a base resume but to also adjust it according to the job you’re applying for. Zety.com has many ways to adjust your resume to match the job. This includes altering relevant skills to meet the job description as well as altering your “Objective” section to fit the mission of the company. This proves to the company that you have done your research, making you a more attractive candidate.

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Some basic differences between good and bad resumes

Hopefully, these tips have inspired you to revise your resume and hit the job market running. I encourage you to think about how you can modify your resume. Is my formatting conducive to an attractive resume? Is my information organized? How can I change my content to conform to the job description? If you answer these questions and adjust your resume accordingly, I am confident you will have an improved resume and will be ready to tackle the job market.

Good luck!

Week 11: Can’t Stop Won’t Stop

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I am a lucky kid.

In addition to living in the greatest country on Earth, I have an awesome family and friends, and go to an amazing school. Recently, I was fortunate enough to be granted another opportunity that has added to my luck.

A few weeks ago, I was accepted into the Villanova Blue Key Society, which is the tour guides on campus. This highly selective group accepts a small crop of freshman each year to be ambassadors for the school and lead tours for prospective students. I was really excited at this opportunity, for it would enable me to spark the same passion in others about Villanova that I have.

During our first training session, a few faculty members came to talk to us about our role as ambassadors. One of the speakers told us that we should immerse ourselves in all possible activities and events in order to be knowledgable about as much as possible.

Logical, given that we are the faces of the school and could be asked about any aspect.

It seems as though Netflix might have been given the same pep talk.

As I have discussed in the past, Netflix is in the beginning stages of both an original content expansion as well as an international expansion. Its quarterly reports have posted gains in international subscribers while domestic gains have been less substantial. This expansion is slated to cost $8 billion, causing some investors to think Netflix is burning its cash a bit too quick.

Well, it seems to be escalating.

This week, Netflix released that it would be showcasing an African series in 2019. This comes in line with its past decisions to expand internationally, this time into the African sphere to reach another untapped audience. The article did not specify if this would be an original series or if Netflix would be contacting another producer to create the series. This news signifies that Netflix plans to cover all its bases, creating unique programs from differing cultures and countries to expand viewership. The article did note the importance of bridging language gaps between viewers and bringing them together with a program such as Netflix.

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Netflix will launch an African series in 2019

Netflix’s expansion effort brought on another dimension this week: animated children’s films. Netflix currently hosts a slew of children’s programs, but it will be adding more in the near future. They plan to animate Raul Dahl’s book (one of my favorite childhood authors), which are wildly popular with children and adults alike. This could be interpreted as a reaction to Disney+, which I wrote about a few weeks ago. Netflix is attempting to add as many levels to its platform as possible, enabling them to compete with the growing amount of streaming services.

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Some of Roald Dahl’s many popular works

Now as a potential investor, this makes me think. And I really don’t know what to make of it.

See, I understand that Netflix wants to expand its content to garner more users. And I think that’s a good idea. But I think they might be doing too much too fast. Yes, a company needs to take risks in order to succeed, but if these new markets do not prove to be as lucrative as thought, Netflix might have trouble making up the money it lost. I would encourage them to slow a bit, ensure that these markets are profitable, and then invest more.

Similar to how the Blue Key speaker said to be involved in everything, Netflix is trying have its hand in every cookie jar. But if that happens, burnout can occur, and then you don’t get any cookies at all.

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Is Netflix spreading itself too thin?

So maybe Netflix should tone down the expansion just a tad before spreading itself too thin.

Til next time,

Sernas

 

Sources:

Netflix to Order African Original Series in 2019

https://finance.yahoo.com/video/netflix-going-more-oscar-nominations-144237982.html

https://finance.yahoo.com/news/netflix-pushes-kids-content-deal-165400600.html

 

Week 10: Staying on Message

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This week was rough.

Despite being national champions last year, the Villanova Wildcats men’s basketball team is off to a slow start. Wednesday was the championship rematch with Michigan, hosted by the Cats in the new Finneran Pavillion. Despite the hype and maximum attendance, the Cats got smacked for a near thirty point loss.

We hoped for a rebound against Furman last night, but were disappointed by an overtime loss. And for a basketball school, it hurts even more.

Needless to say, I’m a disgrunteled fan.

I ended up watching the postgame interview with Jay Wright to see what he would say. Now one of the best things about Jay is how much he defends his players. Jay goes to bat for all of his guys, something I really admire in a leader and a coach. When asked what Villanova would do to rebound from these losses, he mentioned how they would “learn from their mistakes and continue to grind and improve.” Basically, Nova basketball wasn’t going to overreact.

A recent Netflix article reminded me of Jay and the importance of staying focused and on message. Jay preaches unity and hard work, something that has been a staple for Villanova’s two national championships in the past three years (Go Cats!!).

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The deal is close to $50 million

The article, posted by Deadline, discussed a recent deal between Netflix and film production group Paramount, a subset of Viacom. The deal, which is valued at around $50 million, is part of Netflix’s attempt to make its own content. Netflix has worked with Paramount in the past to liscence some of their content, including movies and TV shows. This move stays on message with Netflix’s expansion attempt and move towards becoming a self sufficient platform rather than liscencing other producers’ works.

The move adds to the growing bill for Netflix’s expansion efforts. The expansion is planned to cost close to $8 billion, and despite Netflix’s lack of positive cash flow, they continue to make decisions towards that  value. Earlier this year, Netflix played with the idea of adding advertisements to their service to finance their new content revolution, but found that users were strongly opposed to the idea.

With all this buzz about new content, Motley Fool did an investigation into just how good Netflix’s original material is. Their findings pointed to the fact that Netflix has both winners and losers but can afford the losers because of its desire to reach a wide array of audience members. Their efforts have ropped in 137 million subscribers worldwide, so they must be doing something right.

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Netflix is famous for its original content

I’m not sure if I agree with the expansion effort, but I understand its necessity given the increasing saturation of the market. I think Netflix should take a bit more time in determining what they produce because users might get discrouaged if they are constantly disappointed by original content.

If nothing else, this news shows that Netflix is sticking to its plan. And if Reed Hastings is anything like Jay Wright, I’m confident they’ll achieve their goal if they trust themselves. So good luck Netflix. We’re rooting for you.

See you next week

Sources:

https://www.fool.com/investing/2018/11/18/how-good-are-netflix-originals-its-complicated.aspx

Paramount And Netflix Set Multi-Picture Film Deal

Week 9: Heating Up

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I have two brothers.

As the middle child of three boys, our house was, and still is, loud, rough, and entertaining. A week didn’t go by without a fight in the hallway or a joke gone a little bit too far. In other words, tensions were high. While I’m not sure exactly where this tension stemmed from, I’m fairly confident one thing surely factored into this equation. This is something that plagues boys and girls alike and drives people to do things they might not have otherwise done. The desire to succeed at all costs, to triumph over the opposition.

Competition baby. The lifeblood of a three-boy household.

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I competed with my brothers in everything. From GameCube to weight lifting to who could find a pair of socks in the laundry quickest, I was always competing with them. And while this competition made our house enjoyable, it also made us look anywhere to find an edge over the other person.

It seems like Netflix too is searching the nooks and crannies of its own industry as competition ramps up.

This week, Netflix took another hit as Disney released information about its own new video-streaming service, Disney+. While there were not specific details about content or packaging, simply the notion of increased competition in an already contentious industry was enough to impact Netflix’s stock. The service is slated to debut in late 2019, hosting “a rich array of original Disney, Pixar, Marvel, Star Wars and National Geographic content,” as well as completely new material.

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Disney+ will debut in late 2019

It’s pretty clear what this means for Netflix: more competition for clients and for content. Netflix currently hosts a number of Disney productions, and its likely these will be stripped from the platform when Disney+ goes live. I’m unsure if Disney will be able to compete with the wide array of loyal customers at Netflix and diverse content, but if they can price competitively, they might just shake up the market.

To combat this, Netflix has taken a two prong approach: debuting new content in movie theaters as well as expanding internationally. The former of these two options is largely new to Netflix, while the latter is something that Netflix has been working on for a few years. More on their international efforts later.

In terms of movie theater showings,  Netflix is taking an unconventional move to stream its original content in movie theaters that it once turned way. A Yahoo Finance article reports that Netflix plans to debut three films in theaters throughout November and December. These films will stay in theaters for only a few weeks, much shorter than other movies, before they join Netflix’s online platform. In the past, Netflix has released films in theaters, but has also released them on the platform for viewing on the same day.

I think this comes out of necessity for funding its new content. Netflix needs a new stream of revenue, as their free cash flows is seeing a serious negative number. I don’t think this is a panic move, but rather an attempt to spread their content further and get more bang for their buck.

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Netflix plans to focus expansion efforts in Asia

Now for their international play. According to MarketWatch, Netflix is ramping up its efforts in Asia, set to produce seventeen new Asian productions. These will be centered around Asian culture and geared towards an Asian audience but will be available worldwide. The content for these varies from paranormal investigations to live action movies.

This, too, is not a surprising move by Netflix. Despite its controversial borders, Asia houses close to 4.5 billion people, and while not all of these people have access to the financial or infrastructural needs to support Netflix, a significant enough portion is available for Netflix to capture. This aligns with Netflix’s overall plan to expand internationally, tapping to networks all across the globe.

Needless to say, Netflix is feeling the heat. As a consumer, this is fun to watch, for the competition means we will get more competitively priced products and have an array of choices.

But if eighteen years in a competitive household has taught me anything, this is only the beginning. There’s about to be some haymakers coming in the future, and I’m excited to see the fireworks from the safety of my dorm.

Until next week.

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Source:

https://www.marketwatch.com/story/netflix-is-doubling-down-on-asia-with-17-new-originals-2018-11-08?siteid=yhoof2&yptr=yahoo

https://finance.yahoo.com/news/netflix-embracing-theaters-once-spurned-171900680.html

https://www.fool.com/investing/2018/11/09/why-netflix-inc-shares-fell-6-today.aspx

Week 8: Momentum

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This was an awesome weekend.

Not only was the weather beautiful here in Radnor, Pennsylvania, but this was the 30th anniversary of the Special Olympics held here on Villanova’s campus. A weekend chalk full of competition, courage, encouragement, and smiles.

It’s days like these that make you remember what it’s all about.

One of my favorite memories of the weekend came on Saturday morning. I happened upon a volleyball game between two rival counties whose names I don’t quite remember. When I arrived at the game the score was 12-5 in a game to 21. There were screams and cheers and high fives all around as the winning team scored another point. At 13-5, the losing team called a time out. They regrouped. They reentered.

They scored one point, 13-6.

Then two 13-7. Then three. Cheers from the losing side grew louder and louder as fist bumps grew more frequent. And before I knew it, the score was tied, 13-13. I was wholly invested in this game, not to see who won, but to observe one of my favorite phenomenon in sports and, equally importantly, in markets: momentum.

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See, one could argue that the losing team was not in fact as good as the winning team. Instead, they had momentum. They had confidence, and they rallied over and over to score some points against a tough opponent. But when that momentum eventually ran out, which it did, the better team pulled away with a victory.

This momentum, or lack there of, leads me to Netflix and what seems like a pessimistic view of their future on the Street.

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Netflix’s performance this week

This week, Netflix opened at $305.62 and suffered a midweek dip down to just over $275. Despite this fall, they rallied back to close at $309.10 to finish out the few couple days of October. According to Yahoo Finance, the video streamer fell 25% in October alone, leading to some concern about the future of the company.

And like the underdog team in volleyball, Netflix might be running out of steam.

Despite peaking at $423.21 earlier this year, Netflix has had a turbulent year, and their balance sheet reflects as such. Yahoo Finance reports that Netflix lacks the free cash flows that other major tech companies have. Their balance sheet shows only $3 billion in free cash with $6 billion in current obligations and $8 billion in long term debt.

Netflix is on par to continue to doll out close to $2 billion annually to fund its content expansion efforts. This comes in the wake of management’s announcement that Netflix would begin to focus more on individual content rather than licensing another producers’ content. As the competition in the steaming market begins to increase, Netflix’s new content could be a differentiating factor for the company, but it is currently costing them a large sum of money that they do not seem to have.

While there is positive news in the form of increased international subscribers, investors are still skeptical of Netflix’s future. It’s unknown if Netflix will be able to continue to add users at its current pace, and with niche companies popping up globally, Netflix’s expansion efforts might not go as planned.

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Netflix continues to add international subscribers at a healthy rate

Needless to say, Netflix’s momentum is slowing down and could be reversing to negative sometime soon.

However, being an optimist, I am confident Netflix will add even more users than predicted and continue to have positive gains during this bull run. And like the underdog team in volleyball, they will (hopefully) ride their momentum into victory.

I’d like to conclude this week with the Special Olympics oath:

“Let me win. But if I cannot win, let me be brave in the attempt.”

Whatever you do this week, be brave in the attempt. Go for it. No regrets.

I hope you all enjoy your week.

Week 7: Back to Reality

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I have to make a painful confession.

I am a New York Giants fan. Yes, I am a supporter of the 1-6 Big Blue that would likely lose to my high school football team. And being such a supporter, I have oftentimes looked in the mirror and wondered why I put up with a franchise that seems as misguided at the Giants.

Needless to say, it has been a rough season.

This past week, the S&P had a mini-Giants season, recording losses that have been largely unknown to the 9.5 year bull market. On Wednesday, the Dow Jones dropped over 800 points, its largest correction since February 2016. This comes at the hands of increased interest rates, US tensions with China, and an anxious investor pool constantly asking when the real correction will occur. I similarly struggled to bounce back from a correction: the correction of moving away from my comfortable bed at home and back into my subpar dorm bunk after fall break.

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Netflix’s chart this past week

Needless to say, Netflix was caught up in that selloff, and while their stock is still a top performer, it was time to snap back to reality. Posting a near 10% loss this week, investors seem to be re-evaluating their interest in the stock.

The press revealed some interesting facts about Netflix’s culture that might’ve shocked some readers. While I am unsure if this would affect the stock price, it does give insight into the decision making of Netflix.

A Wall Street Journal article this week discussed the “culture of transparency” evident at Netflix’s headquarters. Some call it a hostile work environment, one centered around explicit feedback from a “360-review.” This encourages candid critique from employees below and above an individual, enabling a full review that can be very confrontational and uncomfortable. There is zero tolerance for sugar coating, resulting in a culture of fear. Individuals are subject to public scrutiny and blunt firing practices, cited by CEO Reed Hastings as ways to cultivate “openness.”

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360 Review

I am not really sure what to make of this news. I think it is important for companies to have full reviews of individuals, both from the upper and lower tiers. Sometimes we don’t realize that those below view us unfavorably, so this tries to cut away at that issue. I’m not a fan of the fear culture, for I think it might make some hesitant to make mistakes in creative ventures.

Once again, I don’t really think this affected the stock price, but it does impact how people view Netflix and can give insight to how their upper management makes decisions.

I think Netflix’s losses this week were spurred by both the loss in the S&P as well as a move towards utilities and household goods from investors. An article from Yahoo finance cites the loss in the tech sector as a whole is due to a movement away from the volatile tech companies and towards more stable investments. My interpretation of this is that it is another move to hedge against the imminent correction. It is likely that tech will be hit hard (as it already has), and investors are looking for less risky places to put their money.

If nothing else, this week has shown that no company, not even the mighty Netflix, is immune to changes in the market.

I am confident, however, that Netflix will rally and continue to reap gains for its shareholders. Unfortunately, the same cannot be said about the Giants. So I sit here, optimistic for Netflix’s future and not so much for the Giants.

Until next week.

 

Sources:

https://www.fool.com/investing/2018/10/27/how-netflix-plans-to-add-up-to-30-million-subscrib.aspx

https://qz.com/work/1439451/the-seven-ways-netflix-culture-sounds-like-your-worst-work-nightmare/?utm_source=YPL&yptr=yahoo

https://finance.yahoo.com/news/best-defense-investors-flee-tech-180800006.html

 

Week 6: Up, Up, and Away

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To my fellow Villanovans, happy fall break. I hope you are enjoying your time to relax as much as I am.

To my non-Villanovan readers, I hope you are enjoying your respective falls.

As I sit writing this blog, I have the Dodgers vs Brewers NLCS game on in the background. At the plate is Los Angeles’ Manny Machado, a formidable force. The camera cuts away to a previous at bat, highlighting a Machado homerun with the commentary, “Going, going, gone!”

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LA Dodgers’ Manny Machado

A homerun in baseball in one of the most electrifying moments, having the capacity to spark a late game rally or erase all hope of a comeback.

It could be said that Netflix hit a homerun with its third quarter earnings report this past Tuesday. Netflix has jumped 5% on the heels of $0.89 per share earnings vs $0.68 expected as well as adding just under 7 million new subscribers. Both these figures beat analysts expectations, providing solid evidence of a rebound from a shaky second quarter.

These added subscribers come from an increase of 5.87 million international subscribers. Earlier in the year, I looked into Netflix’s attempt to spread internationally and the competition they would face in the form of other streaming services (Hulu) and more traditional telecom companies (21st Century Fox). This third quarter report demonstrates how their efforts were successful, adding over 1 million more international subscribers than expected.

This 5% increase has not been able to make up Netflix’s significant losses last week, suffering amid the slight market correction that plagued all sectors and hit tech extremely hard. However, it does give hope that Netflix is still appealling to new users as well as retaining its old users. According to CNBC, CEO Reed Hastings said that, for future quarters, Netflix plans to be “a little better at forecasting” so that their estimates are closer to thair actual figures.

Before we get too excited, there are some skeptics. And if my limited market studies have taught me anything, do NOT ignore the skeptics.

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KeyBanc Analysts have a more pessimistic view of Netflix

A MarketWatch article reports that analysts at KeyBanc do not think that investment returns will materialize soon for investors. This is due to a lack of evidence of revenue growth and accelerating profits. This is not to say that Netflix is not still profitable, but not necessarily to the extent that investors are communicating after the past quarter.

I somewhat agree with KeyBanc’s analysts. I think it is too early to celebrate Netflix’s subscriber growth, but I do think it gives promise to future opportunities and profits. I hope that Netflix continues to add users at their current rate and even accelerates, especially in the largely untapped international market.

So no, this report was not a homerun. But maybe it was a double that, in the long run, can be the spark for a string of hits that puts Team Netflix above the competition.

See you next week.

Sources:

https://www.cnbc.com/2018/10/17/netflix-added-subscribers-in-1-year-nearly-as-fast-as-hbo-in-40-years.html

https://www.cnbc.com/2018/10/16/netflix-q3-2018-earnings-and-revenue.html

https://www.marketwatch.com/story/netflix-downgraded-at-keybanc-due-to-pace-of-spend-and-length-of-time-for-a-return-2018-10-17?ns=prod/accounts-mw

Week 5: Time to worry…?

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I am a chronic worrier.

I worry about everything, from the clothes I wear to class, to the weather, to whether or not I prepared enough for my upcoming midterms. Everything.

As an investor, there is a healthy amount of worrying that can prompt extra research and analysis into a stock. But worrying also causes investors to make hasty, impulsive decisions.

Now this must beg the question: how much of stock volatility is legitimate and how much is simply investor’s getting cold feet?

Well, this week, Netflix experienced its own version of this phenomenon, as fears resulted in a loss of about 12%.

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Netflix stock took a turn this week

According to Motley Fool, this loss is due to an overall loss in the S&P 500 last week. Rising interest rates have made bonds seem like a safer investment, and hence many investors are hesitant to put their money into the market, especially in riskier investments such as Netflix. Motley Fool also notes that this loss can be attributed to apprehension ahead of third quarter earnings reports coming out in the next few weeks. Netflix missed its mark with subscribers and had poor PR last quarter with their advertisements fiasco and are looking for a strong bounce back this quarter.

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Netflix’s diverse content is one of its primary selling points

 

While this bearish view could be result in short term losses, Goldman analysts have a different view. Analysts are confident ahead of this quarters earnings reports, stating that Netflix will exceed expectations of 26.5 million subscribers and instead land close to 30 million.

Their optimism stems from three points: mobile growth possibilities, content spending, and higher quality products. These have lead Goldman analysts to be even more bearish on Netflix, despite apparent concern among other analysts.

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The Fed recently increased interest rates and plans to raise them again later this year and in 2019

This is a lot to process. In the wake of rising interest rates and a booming economy, investors continue to ask one question: when will the market correct?

As an inexperienced investor myself, I don’t have a definitive answer for this future or for Netflix’s. I can see how both Motley and Goldman’s analysts have validity, but I am not sure which is more correct in the current market. I know that there is a correction looming, but I’m struggling to decide whether to enter the market now and continue to ride this 9.5 year bull market or to wait for the correction and get in at a lower cost.

I’m sure this a struggle that most investors face.

How will Netflix react to this loss in market cap? I’m not really sure of that either. I think their quarterly results will either quell investors’ fears or aggravate them. As a blue-chip stock, Netflix is always under scrutiny, and even the smallest change or doubt can cause the nervous investor to sell out and shift the market.

But for now, I will continue to do what I do best: worry.

Enjoy the week ladies and gents. See you on the other side.

Sources:

https://www.fool.com/investing/2018/10/05/why-netflix-stock-dropped-5-today.aspx

https://www.cnbc.com/2018/10/05/-heres-why-one-former-netflix-bull-is-getting-bearish-on-the-stock.html

https://www.barrons.com/articles/3-reasons-netflix-stock-can-still-grow-a-lot-according-to-goldman-sachs-1538497554

https://www.fool.com/investing/2018/10/07/netflix-earnings-mark-your-calendar.aspx

 

 

Week 4: Boooring

boring

This was a tough week.

Despite my best efforts, I struggled to find articles about Netflix that did not pertain to new content or “This falls hot new shows.” In lamenting and vocalizing about my struggles, a friend mentioned how Netflix is a “non problematic company.”

This got me thinking, and I soon realized she was right: Netflix is not a that company draws attention. It does not have an obnoxious ex-CEO like Travis Kalanick that is constantly under allegations of sexual harassment. It does not have an outspoken founder like Elon Musk, who just this week was asked to resign by the SEC for misleading investors. No, Netflix CEO Reed Hastings is a generally level headed man, working quietly out of his headquarters in Los Gatos, California and slowly, but surely, changing the technological and cultural landscape of the world.

musk-kalanick1.jpg
Tesla CEO Elon Musk (left) and ex-Uber CEO Travis Kalanick (right)

And while that might make analysts like me a bit weary and disappointed, the message to investors is one of stability and growth. It is vital to be confident in one’s CEOs, for poor command at the top of a company inevitably leads to more problems down the road. So hang tight Hastings; I know my disappointments are short sighted and selfish.

reed-hastings
Netflix CEO Reed Hastings

Although I did not find any articles regarding current developments with Netflix, I did read another article on Motley Fool that discussed the ramifications of Netflix joining the Live TV industry.

The article discussed how Netflix will adapt to changes in its originally niche market. With the presence of firms such as Hulu, Amazon, and HBO moving into the live streaming realm, Netflix might want to think about its own future in live content. With only more niche companies arriving into the on-demand realm, Netflix will need to make some changes to continue its dominance.

I am not really sure how I feel about this. I think Netflix could probe its users with the possibility of live TV, but I think they would struggle to gain licencing agreements when competing with more established telecom companies. I do think they need to add some dimensions to their business model, for there will only be more companies competing for their users in the future.

It’s even possible Hastings will have to put on his boxing gloves and make some waves in the industry. But for now, with his head beneath the radar, Hastings is doing a pretty good job of leading Netflix into the unknown.

Until next week ladies and gentlemen.

Sources:

https://www.fool.com/investing/2018/09/26/will-netflix-ever-consider-live-tv.aspx