Netflix – Should You Stream It!!!

Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Netflix (NASDAQ: NFLX) as a service provider needs no introduction, it is an on-demand subscription based media provider based in Los Gatos, California, delivering TV shows and movies to a wide variety of customers all around the world including countries such as USA, UK, Ireland, Norway, Sweden etc. But how is Netflix as a stock, is it worth the buy or if one already has bought its stocks then how is the future like for Netflix. And most importantly how will it fair against the completion, can we expect it to maintain its top dog position in the market.

3Q2012 and the Strike Back

In a recent report released by Netflix on its website it was reported that Netflix had more than half million new subscribers during the second quarter and this figure saw a massive bump of two million new subscribers in the their quarter of the current year. This brings the company’s global base streaming customers to an astounding 29million subscriber with the media consumption of 3Billion hours for both movies and TV shows. This led the company earning Net Income of $8 million with gross revenue of $905 million. The 1Q2012 and the 2Q2012 earnings were $-5 million and $6 million respectively. Considering these figures things might be finally looking up for Netflix.

 Though the Q on Q revenue seems to be ramped up but the YoY figure might not be similarly satisfying. 3Q2011 declared earnings of Netflix were $62 million with a gross receipt of $822 million. So, if we compare the prime factor for investment here i.e. the EPS we can see that it has gone down from $1.16 in 3Q2011 to $0.13 in 3Q2012

The Present and Future

The above figure might not paint a very positive picture of Netflix in the forthcoming days but Netflix might still have a few tricks left up its sleeves. With majority of its customer base in USA with an impressive 25.1 million users, Netflix is diversifying into more markets as the time approaches. Amongst some of the new markets being United Kingdom and Ireland, where Netflix seems to generate a lot of buzz. Netflix has already surpassed LOVEFiLM one of the popular media streaming service in the United Kingdom. According to the reports released by Netflix in 3Q2012it is also stated that it would take a bit longer for it to settle in the markets of Britain and Ireland and the expansion of content available in the new markets. And if one notices the growth of Netflix in the new market it is very impressive and if the same figures persist for a continuous period of time it might be able to give a tough competition to major streaming services in UK such as Amazon and Sky.

Now apart from the geographical expansion of its services Netflix is also hard at work to expand its content across various devices. Previously the services of Netflix were confined to physical delivery of its content through DVDs or making it available to download over internet but with the revolution of connected televisions upon us Netflix has a great market where people can directly stream the content on their television sets. And this can be a huge game changer for Netflix considering its strong marketing techniques and the widespread customer base.  

The Competition

iTunes is Apple (NASDAQ: AAPL) Inc.’s media streaming service offering a wide variety of media content including movies, music, applications and TV shows available across the globe on a variety of operating system platforms. Though iTunes enjoys a wider customer base overall and has higher receipts from overall services, but still Netflix lies way ahead of iTunes when it comes to just movies and TV shows. Recently iTunes has spread its customer base to huge developing markets in various parts of Asia, one such market being India with a potential customer base of millions and with more and more people going for streaming their media online, it might pose a potential threat to Netflix since it has not yet spread its services in these markets. This proves to be a factor that might give Apple a monopolistic advantage in these markets.

Google Play is one of the other media streaming service offered by the tech giant Google (NASDAQ: GOOG). Like its arch nemesis iTunes store even the Google play store offers an array of services ranging from music to applications to movies to TV shows. Though Google Play is gaining popularity across the globe through its mobile computing software Andriod OS reaching a wider variety of consumers as compared to Apple and Netflix, all of its contents are not available across all its users for now. The major market of Google Play still lies in USA. And though the media streaming services of Google play are not available in the emerging markets such as various Asian markets where the Cupertino giant Apple has been very active lately, Google is still hard at work to expand its services in these markets. And form the recent market trends one can observe how aggressive Google is when it comes to expansion in the new emerging markets.


The Verdict

If we compare absolute figures and the recent stock price movement for Netflix, things might not seem very bright and sunny, but Netflix still continues to dominate the global market for media streaming and be the inevitable McDaddy of all. And with its diversification in new markets and the aggressive media content expansion things might take a turn for the better in future. For now the Netflix stocks aren’t doing very great in the market and the investors not very strongly advised to invest in such stock. Though interested buyer can wait and watch for a desirable investment opportunity culminates but still they should carefully wait and watch for the stock prices to change. 

piyushlakhmani89 has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Netflix. The Motley Fool owns shares of Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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