Netflix is starring in its own movie
A startling turnaround, led by original productions, has the stock on a tear and appealing to investors with a high tolerance for risk.
Then, a funny thing happened. The Los Gatos, Calif., company learned from its mistakes. It figured out that customers wanted online streaming but didn’t like the way Netflix was selling it to them.
More important, Netflix decided the best way to win back disaffected customers was to offer them something they couldn't get anywhere else. So, it signed deals with studios and decided to get into the TV production business with the drama "House of Cards," and it resurrected the beloved cult comedy "Arrested Development."
The results have been nothing short of spectacular.
Netflix added 2 million U.S. subscribers in the quarter for a total of 29.2 million, surpassing Time Warner's (TWX) HBO channel. Netflix expects to top 30 million in the current quarter and plans to eventually reach 90 million. According to data cited by business news site Quartz, during peak Internet usage time in the U.S., Netflix accounts for 33% of all downstream traffic, an incredible figure.
The stock has skyrocketed since Monday, when the company reported results that were better than even the most optimistic of earnings projections. Plus, it gave bullish guidance.
Unfortunately, the shares, which have surged more than 134% this year and are the top performer in the S&P 500, are extremely expensive, with a price-to-earnings multiple topping 521. The average 52-week price target on the stock, as if it matters is $149.86, more than $62 less than where it recently traded.
What could slow Netflix? Some users are allowing their friends and relatives to "share" their accounts, a practice that analysts expect the company to start policing more closely. Wedbush Securities analyst Michael Pachter told Bloomberg that the service has as many as 10 million freeloaders. This problem, though, is solvable through either creative marketing or technology.
For investors with an appetite for large risk, though, Netflix is worth a chance. The company is on the cutting edge of where the entertainment is headed in the coming years. And as noted, Hastings has already proven the naysayers wrong once.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
What th......MSN was defecating all over Netflix just a few weeks ago....now it's the greatest thing since sliced bread.
Well, MSN, join the rest of us Netflix subscribers, who knew a good thing when we saw it all along.
I think Netflix has made a great move by showing "house of Cards" and other series that keep you the entertained for hours and it keeps you wanting more. So keep these little mini series coming because I have not been watching cable tv lately. Wondering what Comcast is going to do to keep it's customers.
We only use Netflix. Too bad they don't add new releases very often. We supplement with Vudu and DVD purchase.
Many TV viewers are simply fed up with network TV. I know I am. All those repeats in mid-season are just disgusting. I don't want to see repeats of shows I just watched a coupe of weeks ago. I also hate those 'hiatuses'. What's that all about? I've just about decided I'm going to give up watching the shows as they're being broadcast and pick them up later when they come to Hulu, Netflix, Amazon or whatever other alternative source might carry them.
I really miss the 'good ole days' when the seasons began in September and ran straight through to April or May with disruptions only for 'specials' around the Christmas season. That's the only way to go! The networks better figure it out soon or they could being to see their demise!
Second complaint about the idiots running 'the networks', too. Why do they think the only people they have to cater to are between the ages of 18 & 49? Got news for 'em, THE REST OF US COUNT TOO! CBS is probably the best example of this warped thinking. The show Harry's Law with Cathy Bates was their most watched scripted drama but it was cancelled because their 'chosen 18-49 demographic wasn't watching. And now they've withdrawn their support from the Jesse Stone movies with Tom Selleck for the same reason. To me that's just plain disloyal since Tom is under contract to the for Blue Bloods!
Got me once -shame on you.
Not going back for a shame on me.
Only a matter of time ,Netflix will return to their old tricks.
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