Author Topic: NFLX - Netflix  (Read 74917 times)

bmichaud

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NFLX - Netflix
« on: October 25, 2011, 05:10:44 AM »
Down below 80 pre mt, which will be around 19x LTM EPS. Dare I think a  buy at these levels? 19x earning??? Tech would pay 19x sales for this thing.

I won't invest based on it, but I'd say big tech is taking a close look at 19x.


BargainValueHunter

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Re: NFLX - Netflix
« Reply #1 on: October 25, 2011, 10:00:17 AM »
What is the barrier to entry for Google/YouTube, Wal-Mart, Dish/Blockbuster, Amazon, Apple, News Corp., Comcast/Universal, Viacom, Hulu or TiVo?

If the answer is "high" I would invest. But I suspect that Netflix's moat is quite narrow and shallow.
Albert Einstein called compound interest "the greatest mathematical discovery of all time".

watsa_is_a_randian_hero

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Re: NFLX - Netflix
« Reply #2 on: October 25, 2011, 10:15:40 AM »
Down below 80 pre mt, which will be around 19x LTM EPS. Dare I think a  buy at these levels? 19x earning??? Tech would pay 19x sales for this thing.

I won't invest based on it, but I'd say big tech is taking a close look at 19x.

I would not buy it here.  Too much risk with business model (porters 5 forces).  No-moat business - need a steep discount.  In addition, shady management.  What kind of management sells massive amounts of its own shares while using virtually all company free cash flow to buy back shares? 

hyten1

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Re: NFLX - Netflix
« Reply #3 on: October 25, 2011, 10:28:12 AM »
i don't have a position in nflx, still watching

one point i want to make is in regards to nflx's moat. this has been discuss and talk about for quite sometimes. this is the biggest question for me now that valuation has become more reasonable.

the general concensus i hear is nflx's moat is small, to quote what bargainvaluehunter just stated "What is the barrier to entry for Google/YouTube, Wal-Mart, Dish/Blockbuster, Amazon, Apple, News Corp., Comcast/Universal, Viacom, Hulu or TiVo?"

however i am still analyzing this. To say XYZ can easily enter this area is a bit simplistic. Its not like these guys haven't tried or aren't trying. So how come all these big boys who have tried to compete with nflx have all to some degree failed (you can argue if they tried hard enough or if these guys haven't really tried).

google/youtube - nothing yet
walmart - doesn't seem like anything worked
dish/blockbuster - bb have been trying, and still are trying
amazon - their offering is still very limited
apple - itunes its been around for a long while
all the cable guys - all pretty much in same boat, a service like nflx will cannabalize their current biz, then again its prob what they need to do.

the moat i see nflx have (how strong is it I am not sure) is the size of their audience (which allow then to spend more dollars for content, then again many of the big boys can do that too, but why haven't they). and obivously their easy of use, nflx is pretty much on all devices its pretty ubiquitous.

thoughts?

hy


ValueCarl

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Re: NFLX - Netflix
« Reply #4 on: October 25, 2011, 10:28:21 AM »
Regarding moats and/or complimentary products, Hastings mentioned all of the competitors BargainValueHunter is concerned with, while referencing them as "complimentary" content providers within their own "channel" sense. The KEY will continue to remain the provider of the most sought after "CONTENT" as he who garners the most EYEBALLS carrying their pocketbooks with them will win. Interesting concept surrounding the conundrum for all content providers going forward whilst considering the internet paradigm and "freedom factors," huh?   Here is a specific reference to competing forces affects:

6:20: How does Dish or Amazon streaming affect you?
RH: Neither one has added an impact.



Read more: http://www.businessinsider.com/netflix-earnings-2011-10?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=SAI%20Select&utm_campaign=SAI%20Select%202011-10-25#ixzz1boaeP3L7 

Overpaying for stock may be more a matter of subjectivity vs. hindsight objectivity in understanding "value." Akamai has a similar story unfolding which might not recover to the extent that Netflix will, especially for shares purchased in the $40 zip code.

A man's MILEAGE will always differ. The Wall Street butchers are doing a fine job gutting this one with all the RISK it presents to their INCUMBENT MONOPOLIES, however.   >:(
« Last Edit: October 25, 2011, 10:31:03 AM by ValueCarl »

DCG

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Re: NFLX - Netflix
« Reply #5 on: October 25, 2011, 10:36:21 AM »
For their DVD service, their moat was their large distribution system.

For digital streaming, their moat really depends on their contracts, which makes evaluating their future so tough. The networks have the upper hand over Netflix (and other content providers) when it comes to pricing power, so their costs are going to continue to rise. The question was/is whether they could push those costs onto consumers. As the last couple months have shown, that isn't a very easy thing to do; at least not when they increase prices by 60% at once. When contracts expire, and Netflix is unable to renew them, such as what's happening with Starz, their content suffers.






hyten1

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Re: NFLX - Netflix
« Reply #6 on: October 25, 2011, 10:42:15 AM »
DCG content cost issue is an issue for everyone in this biz that doesn't create your own content. So to compare to its competitors its all the same. Unless one argue they should get into content or the fact a company that solely distribute content won't survive or would have very small margins

peter, switching cost is low (so is google :), but that is besides the point). It would be the same for all its competitors.

i guess what this lead me to think is a pure content distributor will prob not be a good biz, unless they are the biggest and only one out there.

bmichaud

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Re: NFLX - Netflix
« Reply #7 on: October 25, 2011, 10:51:29 AM »
I think of it almost akin to Yahoo - the only reason Yahoo's core business is garnering any attention is its user base. Yahoo has zero moat, but its brand attracts users, which PE and/or other tech companies can take advantage of...

Look at what Dish is doing with Blockbuster - an absolutely brilliant move on Ergen's part to give his subs the option to tack on a Blockbuster subscription for $10 per month, costing Dish next to nothing in incremental expenses. It took Blockbuster getting to BK for its brand to be revitalized b/c it had a dying business model (much like a New York Times, which could be revitalized in a different form someday if the print segment dies), but Netflix is online, which is far from a dying business model.

I have no idea the quality of its earnings or the strength of its moat (I don't believe it has one), but given what other companies have done with these types of services (Dish with Blockbuster, MSFT with Skype, current Yahoo situation) in order to take advantage of the user base, it may quite quickly become an attractive takeout target.

Less than $10B in market cap?? That's PEANUTS relative to not only the amount of cash on tech balance sheets but also, more importantly, the STUPIDITY of the tech industry's capital allocation habits.


I'm not buying - just saw what it was down to pre-market on my way in this morning and wanted to throw it out there to see what people were thinking.

enoch01

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Re: NFLX - Netflix
« Reply #8 on: October 25, 2011, 10:51:57 AM »

ValueCarl

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Re: NFLX - Netflix
« Reply #9 on: October 25, 2011, 11:10:03 AM »
If content is king, and the internet is the vehicle for bringing more "cost effective" content to eyeballs globally, then every piece of "content" along with its "creator" is valuable for consumption, like never before in the history of "media," entertainment or otherwise. 

Is Netflix doing any content creating by working with groups of people on their own who produce and create?

http://www.hollywoodreporter.com/live-feed/netflix-house-cards-hbo-producers-252501

Dumb em down, overpriced "subscription bundles" tied to "walled gardens" are fast becoming ancient relics. You must go OVER THE TOP to wherever you are individually satisfied, in this brave new content world.  ;)   Content owners seeking mass audiences better also remain mindful over the "quality" of their NETWORK STREAMS!  ;D