Your questions answered Vol 2 - IM Private Clients
Discussion
Netflix
The US dollar continues to strengthen meaningfully against most currencies at a historic pace, with the Euro recently falling below the US dollar for the first time in two decades, a significant headwind for all multinational US companies. To some extend this is offset by the company's Eurobond debt which 'shrunk' by $305M equiv(on conversion) and explains the earnings beat above guidance (EPS of $3.20 vs. $2.97 a year ago exceeded our guidance forecast of $3.00 )
Forecast paid net adds for Q3 of +1.0m vs. 4.4m in the year ago quarter-an acceptable figure given it wasn't long ago that market pundits were claiming it's all over for Netflix and they'd reached peak subs. Clearly not the case.
Asia Pacific had a stand out 'year', growing 23% on a constant currency basis.
An interesting graphic, below which not only illustrates the strength of streaming content and also the future for lineal TV/content.
The Q3 forecast drop in Operating Income is FX(USD) strength and a 150M one off restructuring charge-Exiting Russia and Belarus etc
It is clear to see the business is hugely profitable and is trading at a low PE of around 15
New advertising initiatives in partnership with Microsoft. Due to gain traction in FY 2023.
Netflix has agreed to acquire an animation studio for circa $500M cash.
Netflix has had great success entering online gaming. In particular its blockbuster game 'exploding kittens'
Other initiatives to tackle the 100M freeloading accounts due to password sharing-asking customers to pay an addition $3 per month to retain the added household. I can only see this being accretive to earnings.
It will be interesting to see how this partnership with Microsoft pans out in a number of areas. Microsoft has big ambitions in the streaming segment, particularly in gaming. And of course, Netflix are currently using AWS to serve their content. A staggering $100m+ per month and growing spend on cloud services which naturally would be a good/easy fit for MSFT Azure!
In summary, a pleasing report card, and one which confirms the fundamentals of the business are intact and management have a solid plan for future growth. At these compressed multiples Netflix represents a solid value proposition. The market is reacting positively to the above and I would expect analyst rerating in the coming days.
The US dollar continues to strengthen meaningfully against most currencies at a historic pace, with the Euro recently falling below the US dollar for the first time in two decades, a significant headwind for all multinational US companies. To some extend this is offset by the company's Eurobond debt which 'shrunk' by $305M equiv(on conversion) and explains the earnings beat above guidance (EPS of $3.20 vs. $2.97 a year ago exceeded our guidance forecast of $3.00 )
Forecast paid net adds for Q3 of +1.0m vs. 4.4m in the year ago quarter-an acceptable figure given it wasn't long ago that market pundits were claiming it's all over for Netflix and they'd reached peak subs. Clearly not the case.
Asia Pacific had a stand out 'year', growing 23% on a constant currency basis.
An interesting graphic, below which not only illustrates the strength of streaming content and also the future for lineal TV/content.
The Q3 forecast drop in Operating Income is FX(USD) strength and a 150M one off restructuring charge-Exiting Russia and Belarus etc
It is clear to see the business is hugely profitable and is trading at a low PE of around 15
New advertising initiatives in partnership with Microsoft. Due to gain traction in FY 2023.
Netflix has agreed to acquire an animation studio for circa $500M cash.
Netflix has had great success entering online gaming. In particular its blockbuster game 'exploding kittens'
Other initiatives to tackle the 100M freeloading accounts due to password sharing-asking customers to pay an addition $3 per month to retain the added household. I can only see this being accretive to earnings.
It will be interesting to see how this partnership with Microsoft pans out in a number of areas. Microsoft has big ambitions in the streaming segment, particularly in gaming. And of course, Netflix are currently using AWS to serve their content. A staggering $100m+ per month and growing spend on cloud services which naturally would be a good/easy fit for MSFT Azure!
In summary, a pleasing report card, and one which confirms the fundamentals of the business are intact and management have a solid plan for future growth. At these compressed multiples Netflix represents a solid value proposition. The market is reacting positively to the above and I would expect analyst rerating in the coming days.
Edited by AdamIM on Wednesday 20th July 10:26
You may recall Unilever attempted to buy GSKs Sensodyne and Panadol division for an eye watering £50B-a ludicrous offer which was rebuffed by the GSK board.
GSK has now spun off the division for a paltry £30B. I would have expected a ticking off of the Board rather than pats on the back and big pay increases.
GSK has now spun off the division for a paltry £30B. I would have expected a ticking off of the Board rather than pats on the back and big pay increases.
AdamIM said:
You may recall Unilever attempted to buy GSKs Sensodyne and Panadol division for an eye watering £50B-a ludicrous offer which was rebuffed by the GSK board.
GSK has now spun off the division for a paltry £30B. I would have expected a ticking off of the Board rather than pats on the back and big pay increases.
You'll be keeping clear then? GSK has now spun off the division for a paltry £30B. I would have expected a ticking off of the Board rather than pats on the back and big pay increases.
2Btoo said:
AdamIM said:
You may recall Unilever attempted to buy GSKs Sensodyne and Panadol division for an eye watering £50B-a ludicrous offer which was rebuffed by the GSK board.
GSK has now spun off the division for a paltry £30B. I would have expected a ticking off of the Board rather than pats on the back and big pay increases.
You'll be keeping clear then? GSK has now spun off the division for a paltry £30B. I would have expected a ticking off of the Board rather than pats on the back and big pay increases.
Carbon Sasquatch said:
Phooey said:
Is the verification code for log-ins broken?
Seems to be - I just tried & haven't received one.A quick update on this:
Everything at our end is working as it should. Messages are being sent, but not delivered. It would appear there is a problem with the vendor, API. It should resolve itself shortly. Thanks
Adam
Edited by AdamIM on Wednesday 20th July 14:11
AdamIM said:
Netflix
...
In summary, a pleasing report card, and one which confirms the fundamentals of the business are intact and management have a solid plan for future growth. At these compressed multiples Netflix represents a solid value proposition. The market is reacting positively to the above and I would expect analyst rerating in the coming days.
What would be your definition of success? What would failure look like to you? ...
In summary, a pleasing report card, and one which confirms the fundamentals of the business are intact and management have a solid plan for future growth. At these compressed multiples Netflix represents a solid value proposition. The market is reacting positively to the above and I would expect analyst rerating in the coming days.
Are you looking for regular dividends of a certain value per annum, or a certain growth rate per annum?
You are the professional, but my first thought as an amateur is "confirmation bias". I just want to be sure that your expectations for growth in value is similar to mine, especially when mainstream media were suggesting a comparison between Netfix and Blockbuster.
Hi Pingu,
Using your example, Blockbuster most definitely failed. Mind you it never made a profit. Not ever. Its peak , revenue wise was 2004 with 6b revenue and a 1.3b loss. Netflix has close to 30b revenue and 5b earnings. I won’t be defending my commentary against someone who says Netflix is like blockbuster.
Using your example, Blockbuster most definitely failed. Mind you it never made a profit. Not ever. Its peak , revenue wise was 2004 with 6b revenue and a 1.3b loss. Netflix has close to 30b revenue and 5b earnings. I won’t be defending my commentary against someone who says Netflix is like blockbuster.
Amazon announced today, its intention to acquire One Medical in an all cash $3.9B deal.
The company services the tele-health segment. Essentially a Zoom based Dr's appointment.
Why you might ask? About 18 months ago Amazon AMZN launched 'Amazon Pharmacy' and entered the over the counter retail medicines market. They currently sell about $30b in meds annually and it's one of their fastest growing segments.
One Medical has around 800k members who pay a monthly subscription for access. they have been growing at about 30% p.a. I suspect there will also be some operating leverage via Prime's 200M members. In short Amazon see this acquisition as gaining access to another distribution channel for Amazon Pharmacy.
AdamIM said:
Hi Pingu,
Using your example, Blockbuster most definitely failed. Mind you it never made a profit. Not ever. Its peak , revenue wise was 2004 with 6b revenue and a 1.3b loss. Netflix has close to 30b revenue and 5b earnings. I won’t be defending my commentary against someone who says Netflix is like blockbuster.
I didn't. It was the mainstream media.Using your example, Blockbuster most definitely failed. Mind you it never made a profit. Not ever. Its peak , revenue wise was 2004 with 6b revenue and a 1.3b loss. Netflix has close to 30b revenue and 5b earnings. I won’t be defending my commentary against someone who says Netflix is like blockbuster.
I'd just like to know what you would call success, and at what point you would call failure. I would expect reality to far exceed "success" and reality to get nowhere close to "failure". You set the rules, we just watch the game.
renmure said:
Blockbuster was a success for me. When my local branch closed I still had a Betamax copy of Cobra starring Sylvester Stallone out on rental. I kept quiet and still have it. That's got to be a "win"
ahem. All part of the service, Jim 
Pingu, I recant my statement. Blockbuster was a huge success for some
pingu393 said:
AdamIM said:
Hi Pingu,
Using your example, Blockbuster most definitely failed. Mind you it never made a profit. Not ever. Its peak , revenue wise was 2004 with 6b revenue and a 1.3b loss. Netflix has close to 30b revenue and 5b earnings. I won’t be defending my commentary against someone who says Netflix is like blockbuster.
I didn't. It was the mainstream media.Using your example, Blockbuster most definitely failed. Mind you it never made a profit. Not ever. Its peak , revenue wise was 2004 with 6b revenue and a 1.3b loss. Netflix has close to 30b revenue and 5b earnings. I won’t be defending my commentary against someone who says Netflix is like blockbuster.
I'd just like to know what you would call success, and at what point you would call failure. I would expect reality to far exceed "success" and reality to get nowhere close to "failure". You set the rules, we just watch the game.
Everything is transitory.
Netflix are now in a crowded room with a finite supply of buyers.
Blockbuster was arguably fighting Sky TV. In the early 90s Sky TV and notably Sky Movies meant we rarely went to a video shop any more.
In the late 90s region 1 DVD players brought video shops back in a bit with region 1 rentals a year before Sky Movies got the films!
Then Napster and file sharing brought on ADSL brought about the concept of streaming.
Netflix got in on it with official streaming, but they were late to the party on the concept… people were consuming this way for a decade earlier.
I’d look towards the new ways people will be sharing content for free, to get an idea of where the mainstream will eventually follow.
What seems to drive the change, convenience aside, is also slowly gutting the concept of profiteering middlemen.
Netflix saw this by creating their own content, but just how much content does the world need at the current spend rate?
I’d argue it’s saturated and we just don’t know it yet.
Netflix are now in a crowded room with a finite supply of buyers.
Blockbuster was arguably fighting Sky TV. In the early 90s Sky TV and notably Sky Movies meant we rarely went to a video shop any more.
In the late 90s region 1 DVD players brought video shops back in a bit with region 1 rentals a year before Sky Movies got the films!
Then Napster and file sharing brought on ADSL brought about the concept of streaming.
Netflix got in on it with official streaming, but they were late to the party on the concept… people were consuming this way for a decade earlier.
I’d look towards the new ways people will be sharing content for free, to get an idea of where the mainstream will eventually follow.
What seems to drive the change, convenience aside, is also slowly gutting the concept of profiteering middlemen.
Netflix saw this by creating their own content, but just how much content does the world need at the current spend rate?
I’d argue it’s saturated and we just don’t know it yet.
Mr Whippy said:
Everything is transitory.
Netflix are now in a crowded room with a finite supply of buyers.
Blockbuster was arguably fighting Sky TV. In the early 90s Sky TV and notably Sky Movies meant we rarely went to a video shop any more.
In the late 90s region 1 DVD players brought video shops back in a bit with region 1 rentals a year before Sky Movies got the films!
Then Napster and file sharing brought on ADSL brought about the concept of streaming.
Netflix got in on it with official streaming, but they were late to the party on the concept… people were consuming this way for a decade earlier.
I’d look towards the new ways people will be sharing content for free, to get an idea of where the mainstream will eventually follow.
What seems to drive the change, convenience aside, is also slowly gutting the concept of profiteering middlemen.
Netflix saw this by creating their own content, but just how much content does the world need at the current spend rate?
I’d argue it’s saturated and we just don’t know it yet.
But like most technology based companies - only the best ever survive. Of course Netflix has competition, but they (Netflix) are still top of their game. They need to (and i think they will) continue to be the leader the pack, or at the very least be in the top 2. IMO I just think they've taken their eye of the ball in respect of having it too easy during Covid. This next period will do them good (again IMO) as it will give them chance to fix the leaks in the bucket and then concentrate on getting back to growth. I don't see streaming going anywhere.Netflix are now in a crowded room with a finite supply of buyers.
Blockbuster was arguably fighting Sky TV. In the early 90s Sky TV and notably Sky Movies meant we rarely went to a video shop any more.
In the late 90s region 1 DVD players brought video shops back in a bit with region 1 rentals a year before Sky Movies got the films!
Then Napster and file sharing brought on ADSL brought about the concept of streaming.
Netflix got in on it with official streaming, but they were late to the party on the concept… people were consuming this way for a decade earlier.
I’d look towards the new ways people will be sharing content for free, to get an idea of where the mainstream will eventually follow.
What seems to drive the change, convenience aside, is also slowly gutting the concept of profiteering middlemen.
Netflix saw this by creating their own content, but just how much content does the world need at the current spend rate?
I’d argue it’s saturated and we just don’t know it yet.
Phooey said:
Mr Whippy said:
Everything is transitory.
Netflix are now in a crowded room with a finite supply of buyers.
Blockbuster was arguably fighting Sky TV. In the early 90s Sky TV and notably Sky Movies meant we rarely went to a video shop any more.
In the late 90s region 1 DVD players brought video shops back in a bit with region 1 rentals a year before Sky Movies got the films!
Then Napster and file sharing brought on ADSL brought about the concept of streaming.
Netflix got in on it with official streaming, but they were late to the party on the concept… people were consuming this way for a decade earlier.
I’d look towards the new ways people will be sharing content for free, to get an idea of where the mainstream will eventually follow.
What seems to drive the change, convenience aside, is also slowly gutting the concept of profiteering middlemen.
Netflix saw this by creating their own content, but just how much content does the world need at the current spend rate?
I’d argue it’s saturated and we just don’t know it yet.
But like most technology based companies - only the best ever survive. Of course Netflix has competition, but they (Netflix) are still top of their game. They need to (and i think they will) continue to be the leader the pack, or at the very least be in the top 2. IMO I just think they've taken their eye of the ball in respect of having it too easy during Covid. This next period will do them good (again IMO) as it will give them chance to fix the leaks in the bucket and then concentrate on getting back to growth. I don't see streaming going anywhere.Netflix are now in a crowded room with a finite supply of buyers.
Blockbuster was arguably fighting Sky TV. In the early 90s Sky TV and notably Sky Movies meant we rarely went to a video shop any more.
In the late 90s region 1 DVD players brought video shops back in a bit with region 1 rentals a year before Sky Movies got the films!
Then Napster and file sharing brought on ADSL brought about the concept of streaming.
Netflix got in on it with official streaming, but they were late to the party on the concept… people were consuming this way for a decade earlier.
I’d look towards the new ways people will be sharing content for free, to get an idea of where the mainstream will eventually follow.
What seems to drive the change, convenience aside, is also slowly gutting the concept of profiteering middlemen.
Netflix saw this by creating their own content, but just how much content does the world need at the current spend rate?
I’d argue it’s saturated and we just don’t know it yet.
I believe Netflix got caught up with Covid's accelerated growth where they saw a 3 year stack, 3 years growth in 1 year. It is clear they have learned from their mistakes and are addressing the password sharing issues. I expect their deal with Microsoft to expand into gaming and advertising.
Everyone is entitled to their opinion but they aren't a Blockbuster who had huge debt, 9,000 retail stores and 85,000 staff (netflix has about 11-12k).
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