Netflix’s stock is not that vulnerable


    UPDATE: Netflix has confirmed to have had begun its roll out of *high dynamic range (HDR) content on its TV and film streaming service. However, to view them members would require a new type of TV, monitor and a premium-priced Netflix subscription.

    (*this quality displays millions more shades of color and extra levels of brightness than normal ones, allowing images to look more realistic)

    Volatility might not be new-fangled terminology while considering Netflix Inc.’s stock; the company has a record worth several dramatic comebacks, despite of being a publicly vulnerable traded stock.

    INSIGHT: During 2008-2011, as when company began to disseminate information about video streaming services to around million users globally, its shares had been gaining more value. However, a customer rebellion and some ham-handed Press Releases by CEO Reed Hastings sent those shares dropping by an approximate of 75% for a longer time. Despite of that, Netflix’s stock rebounded; uplifting itself from a split-adjusted low of under $8/share in year 2012 to more than $60 by initial months of year 2014 – alongside a more than $130 by the end of last year. No doubt, that stock was the S&P 500’s (SPX) top-performing constituent in 2015.

    Currently, the stock still seems groovy where the shares have plunged about 10% annual-to-date for underperforming the market – 20% bearish in comparison to last year’s peak. So, is Netflix’s competition taking a toll here?

    On keeping in view streaming-video giant’s historic performance, investors are cautious to think at least twice before they proceed on disregarding it. Let’s consider brief but important postulates, in that regard:

    • Stronger Profits: In January this year, Netflix reported stellar profits of 10 cents/share over forecasts of 2 cents/share. While those profits were consecutively bearish over annual estimates, shares had hiked by double-digits after-hours on the big beat. So it might head towards another beat when Capital IQ looks onto a prediction of 4 cents /share.
    • Controlled content cost: Another most important thing to consider is Netflix’s **original programming that intends to appease both critics and investors alike. It’s often cheaper for Netflix to produce original programming than license big-name titles, and controlling content costs is a big reason for the company’s recent success. The focus on quality over quantity is a wise one to keep down programming costs.

    (**House of Cards and Making a Murderer documentary series)

    • Expanding horizons for business enterprise: A long-term plus point for investors to consider as when Netflix takes its business abroad and now the U.S. streaming market has developed well. In January, Netflix segment information reported 4.04 million additional international memberships in the 4Q-2015 in comparison to 3Q-2015, far above expectations for 3.51 million international memberships.
    • Video Streaming Popularity: Netflix claims to have nearly 74.8 million streaming customers globally, out of which an estimate of 44.7 million are on U.S scale. Recently launched HBO Now had fewer than 1 million customers as of a few months ago, meanwhile Hulu only just cracked the 9 million customers.
    • Growing Mobile App: Netflix is doing its best to navigate in an increasingly mobile world. As smartphones continue to become more dominant, Netflix is trying to adapt to how its customers are using its product — and nothing is more frustrating than getting a massive wireless bill because you used too much data. The company has a FAQ and specific data-saver settings to aid consumers cap their data use.
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    I am a lecturer at the University of Economics in Bratislava, department of Banking and International Finance. I have a Ph.D. academic degree, my dissertation was focused on major markets. Commodities and stock markets are also the main focus of my research and publication activities. I have approximately 10 years of investing experiences. My investments mostly focus on small- to mid-cap companies of energy sector, financial and technology.