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COULD NETFLIX BE WORTH $1 TRILLION
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After forming a base since July β Netflix looks set to once again retest a stubborn $550 resistance level that has acted as the summit of a long sideways trading channel! So what can power Netflix through $550? How far can the stock travel if it does breakout? AND dare I say, what will happen if it fails at $550 for a 4th time?
BULL CASE FOR NETFLIX
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Whilst Netflixβs revenue growth is still impressive (+30%) their net income is ππ₯π’πͺππ‘π πππ¦π§ππ₯ than all other members of the FAANG group + Microsoft (Other comparably large market cap stocks)
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Netflix has increased the price of their memberships 4 times in the last 5 years. Now with almost 200 million users, every time Netflix raises the monthly subscription price by $1 β the company will add an extra $2.4 billion per year in revenue! Thatβs ππ¬% π₯ππ©ππ‘π¨π ππ₯π’πͺπ§π without accounting for the millions of new subscribers they continue to attract!
ππ‘π§ππ₯π‘ππ§ππ’π‘ππ ππ₯π’πͺπ§π:
As US subscriber additions began to plateau, Netflix has begun attracting customers across South America, Europe and Asia at a rate reminiscent of the early days. In fact, India is likely going to be a key market for Netflix! The Indian video streaming market is projected to be the πππ¦π§ππ¦π§ ππ₯π’πͺππ‘π in the world (29% CAGR) and Netflix is doing a great job of winning in this market!
This year Netflix grew subscribers in the region by 200%, they almost doubled their revenue and despite heavy investments β Netflix managed to grow local earnings by 73%! Markets like this will likely fuel Netflixβs growth for years to come.
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For some time, investors wondered how Netflix would address itβs insatiable cash burn rate. How could the company become profitable enough to warrant such a high market cap when year-after-year content spending continued to outpace earnings? Netflix has eased these fears by flexing itβs price power with multiple price hikes. That said, there is a theory that Netflix plans to one day become one of the woldβs largest πππ§π ππππ₯ππππ§ππ’π‘ companies.
π₯ππ ππ πππ₯, first and foremost Netflix is a tech company with excellent AI capabilities! Therefore, the company could easily begin to monetise the huge amount of user activity and viewing data that they collect from their 200m customers! Not only does Netflix know your age, sex & nationality. They also know what you like to watch, when you watch it, pinpoint moments where you switch off a show and lotβs of other key info that is πͺπ’π₯π§π π ππ’π₯π§π¨π‘π to movie studios, marketing companies & advertisers!
BEAR CASE FOR NETFLIX
ππ¨π₯π₯ππ‘π§ππ¬ π’π©ππ₯π©πππ¨ππ:
Based on various metrics including; Price to sales (10), Forward price-to-earnings (60), Free cash flow per share (1.4) & PEG (2.89), Netflix is π’π©ππ₯π£π₯ππππ versus other members of the FAANG group.
π§π’π¨ππ π₯ππ¦ππ¦π§ππ‘ππ:
As the stock approaches $550 per share, Netflix is at risk of forming a π€π¨πππ₯π¨π£ππ π§π’π£! Over the past 6 months, Netflix has suffered 3 serious declines of 15% upon reaching $550. If the stock begins to slow down as it reaches this level for a 4th time then investors may panic and spark another big sell-off! If this occurs, then expect Netflix to drop like a hot potato straight to $500 and potentially breakdown further to $475!
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But donβt worry its only Disney, Apple, Amazon & Google that Netflix have to worry about! The video streaming market seems like one of the safest long term growth trends out there however, Netflix finally has company in the shape of 4 ππππ₯ππ¦π¦ππ©π ππππ‘π§π¦ who donβt like sharing! If Netflix had found itself in this war 3 years ago then investors would be running scared. However, Netflix has used their first mover advantage well to ππ₯π’πͺ π₯ππ£ππππ¬ into a worthy competitor to anybody.
Itβs been an easy game trading Netflix stock for the past 6 monthsβ¦ Buy near $475 & sell near $550! One of these levels has to break sooner or later and when it does Netflix will have a ππ¨ππ ππ₯ππππ’π¨π§β¦ or down! Right now the proverbial Netflix tennis ball is on itβs way to $550, if itβs not returned then I think we could see a 20% jump in the stock. This could just be the start as I believe that Netflix has the potential to one day reach a $1 trillion valuation... Why not? π¦π§π₯ππ‘πππ₯ π§πππ‘ππ¦ have happened π
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