as a netflix shareholder, I was definitely aware that we came into earnings at a pretty frosty valuation. I considered selling on that basis alone many times this year. A few thoughts. 1) I don't believe Netflix is a traditional media conglomerate, and i'd put their terminal growth rate closer to 5% if not higher. 2) Netflix has a growing baseline of content that it produces each year, and while its definitely going to need to keep spending on content (both original and licensed), eventually this should flatten and create some operating leverage. 3) Netflix stands to offer the most eyeballs for sporting events and has the capacity to win a good portion of that business (which it could certainly charge more for). 4) Games and Merchandising are a still untapped monetization path in my opinion. Part of my original Netflix thesis was that it had the potential to fill the roll of Wii games or trivia type games for parties, and moreover could license its IP for all sorts of "disney" type toys and experiences. What I love about Netflix's business is that they get incredible user data with DTC, their capex is spent on something that conceivably holds value forever (movies/TV shows), and because this IP is meaningful to the public, netflix has a lot of optionality to grow the business in creative ways around its IP (games/toys/experiences). So for all these reasons i've chosen to somewhat ignore the valuation (this time/for now). Time will tell if thats a good idea
Thanks so much for sharing this detailed perspective. I completely agree that Netflix’s IP and user data create a strong foundation for long-term optionality, especially if they lean further into gaming and merchandising. Your point about capex translating into enduring assets (content that keeps paying off) is a great way to frame their investment model.
I also share your view that valuation feels stretched at times, but it’s hard to ignore the structural advantages Netflix has built. The sporting events angle you mentioned is particularly interesting, it could meaningfully diversify revenue streams if executed well.
Appreciate you adding such thoughtful nuance to the discussion!
Netflix has been one of my best holding and I lighten my position on the way up. But getting concerned as momentum has slowed down and could take a bearish turn soon.
Thanks a lot! I totally get your concern, the recent price action has definitely been tricky to read. I think your approach of trimming on strength while keeping a long-term position makes a lot of sense. Netflix’s momentum has slowed.
as a netflix shareholder, I was definitely aware that we came into earnings at a pretty frosty valuation. I considered selling on that basis alone many times this year. A few thoughts. 1) I don't believe Netflix is a traditional media conglomerate, and i'd put their terminal growth rate closer to 5% if not higher. 2) Netflix has a growing baseline of content that it produces each year, and while its definitely going to need to keep spending on content (both original and licensed), eventually this should flatten and create some operating leverage. 3) Netflix stands to offer the most eyeballs for sporting events and has the capacity to win a good portion of that business (which it could certainly charge more for). 4) Games and Merchandising are a still untapped monetization path in my opinion. Part of my original Netflix thesis was that it had the potential to fill the roll of Wii games or trivia type games for parties, and moreover could license its IP for all sorts of "disney" type toys and experiences. What I love about Netflix's business is that they get incredible user data with DTC, their capex is spent on something that conceivably holds value forever (movies/TV shows), and because this IP is meaningful to the public, netflix has a lot of optionality to grow the business in creative ways around its IP (games/toys/experiences). So for all these reasons i've chosen to somewhat ignore the valuation (this time/for now). Time will tell if thats a good idea
Thanks so much for sharing this detailed perspective. I completely agree that Netflix’s IP and user data create a strong foundation for long-term optionality, especially if they lean further into gaming and merchandising. Your point about capex translating into enduring assets (content that keeps paying off) is a great way to frame their investment model.
I also share your view that valuation feels stretched at times, but it’s hard to ignore the structural advantages Netflix has built. The sporting events angle you mentioned is particularly interesting, it could meaningfully diversify revenue streams if executed well.
Appreciate you adding such thoughtful nuance to the discussion!
We can start a 50 PE support group! haha.
Great analysis.
I am definitively concerned by the recent price action but still holding into my long term position
Netflix has been one of my best holding and I lighten my position on the way up. But getting concerned as momentum has slowed down and could take a bearish turn soon.
Thanks a lot! I totally get your concern, the recent price action has definitely been tricky to read. I think your approach of trimming on strength while keeping a long-term position makes a lot of sense. Netflix’s momentum has slowed.