We’ve got a Netflix update. The streamer was up on the earnings chopping block yesterday and told investors that while it missed their revenue and profit targets, it beat its own new subscriptions target, but this couldn’t prevent a 16% plummet!
Netflix has missed expectations six times in the last seven quarters, but investors won’t usually be told “no.” This was last decade’s best-performing stock, and it just hit a new record of $550. It trades on momentum; when FAANG goes up, Netflix is dragged up by association.
The local bear population has been feeling a lot of pain despite its focus on real financial results, when you would expect the bulls to be slain down for ignoring those numbers. The business is unprofitable. It burns cash to maintain subs, and competitors are incoming.
We can only call on the original intelligent investor to help us understand this, Ben Graham, Buffett’s mentor. He said in the 1920s that “in the short-run, the stock market is a voting machine, but in the long-run, it’s a weighing machine.” This is a timeless investing quote!
In the long-run, Netflix hopes that two chief executives will prove twice as effective as one, with chief content boss Ted Sarandos set to join Reed Hastings at the helm of the firm. This power duo will be prioritizing investment in content to make sure that Disney and Amazon’s shows don’t come close; content is key. If content is good, Netflix can turn a profit!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
Originally published by Chris Morrissey at https://invstr.com on July 17, 2020.