Wall Street Researcher

Netflix Inc


Time To Step Up – 3 Reasons

A modest dip in subscribers loosing 200,000 last quarter drove these shares into the dumpster ,hitting a yearly low of $172.30 down 70% from its years high of $700. Legendary hedge fund manager Bill Ackman threw in the towel loosing over $400 million . Yes ” time to buy” bargain basement and time to shop .

These shares are trading at 20 times earnings rivaling Discovery , Disney and Comcast  Revenues of $7 billion growing at 10% isnt bad. With 222 million subscribers growing at 7% year over year, yes we may have just seen a small blip to the downside. These shares are significantly oversold and time now to step in.

All serious traders should begin to buy carefully and climb aboard this train . Traders should initiate a position and average either way it trades. VALUE is the key to this trade.

Netflix‘s first-quarter earnings report led to a massive one-day share decline. Weak subscriber numbers had investors fleeing the stock, and a poor outlook for adding customers led to a single-day drop of 35%.

But amid the negativity, other numbers indicate that the drop might offer an opportunity to long-term investors. The question is whether those advantages outweigh a glaring weakness that showed up in the subscriber numbers of the entertainment stock. Here are three reasons to buy Netflix and one reason to sell

1. Valuation

The drop in the stock price following earnings slammed tech investors across the board. Amid a slight decline in its subscriber base compared with the fourth quarter, Netflix stock wiped out more than four years’ worth of gains.

However, its price-to-earnings ratio now stands at 20. This is a valuation it has not seen in nearly 10 years. Its multiple is now more comparable to that of Comcast and Warner Bros. Discovery, which sell for 15 and 14 times earnings, respectively. Moreover, it has become significantly cheaper than Disney (now at 72 times earnings), and it is a radical change from the pre-pandemic days when Netflix typically sold for a P/E ratio of over 100.

2. Financials

And while it does not post the rapid growth of past years, its financial performance remains solid. Revenue of just under $7.9 billion grew 10%. Despite the sequential drop in subscribers, subscriber numbers still rose 7% year over year to just under 222 million.

3. A Robust Outlook

For all of the concerns about its outlook, its problem came from not meeting investor expectations. Indeed, the forecast of a decline in subscribers of 2 million looks disappointing on the surface.

However, the company still forecasts 10% year-over-year revenue growth. This comes from a cost increase that will take its standard plan from $13.99 per month to $15.49 per month. It also plans a lower-cost, ad-supported option to attract customers who think its current service costs too much, and a move into gaming could increase interest in the platform.

Although analysts forecast a 3% dip in net income for the year, they also believe it will grow by 15% in 2023. Thus, they see its current struggles as temporary.

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