For Netflix, Red is the New Black

The struggles for profits [View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Streaming Stock Searches in the Last Month Rank Name Searches #1 'Netflix Inc 296 #2 'Walt Disney Company 279 #3 'Warner Brothers 113 #4 'Paramount Global 78 #5 'Roku Inc 70 #ad [One of the top growth stocks to watch in 2023]( Brought to you by [Upexi]( [This Could Be Your Biggest Trade For 2023?]( [Upexi - This Could Be Your Biggest Trade For 2023?]( This under-the-radar company is one of the top growth stocks to be watching in 2023. Now may be a critical time to have your eyes on this emerging NASDAQ company, a multifaceted brand owner with established brands in the health, wellness, pet, beauty, and other growing markets. It announced recently that its children's toy brand will expand its retail presence nationally through 2,000 Walmart stores, a major milestone for the brand and may prove to be the best year in its history. It doesn’t stop there; this company has been on a rampage announcing big developments left and right including several high-value acquisitions. A most recent acquisition is expected to help the company generate $100 million in sales for 2023! The company also announced its financial results for the fiscal 2023 first quarter, revealing that revenue increased 199% YOY. [The second quarter was a record quarter! See why this under-the-radar NASDAQ company is proving to be a long-term winner.]( For Netflix, Red is the New Black Netflix (NFLX) has fallen into the same trap as cable companies years ago. With markets heavily saturated, its growth slowed to a relative standstill. The latest quarterly results highlighted user growth up 1.75 million or 4%, a far cry from the millions it added every quarter when double-digit subscriber increases were common. Management effectively acknowledged the inflection point when it rolled out advertising and began to crack down on password sharing. Netflix search volume by financial pros has declined proportionally to its share price. We see the recent surge as nothing more than a last hurrah and would caution against initiating a position here. Netflix’s Business Unless you’ve been living under a rock, you know who Netflix is and what they do. So let’s skip the explanation about how they stream, charge subscription fees, and produce their own content. The company recently created ad-supported subscriptions in an effort to boost sales, making it more like traditional cable networks. [Netflix Investor Relations] [Source: Netflix Investor Relations]( Only about a third of U.S. households don’t subscribe or have access to Netflix, compared to 27% that didn’t have cable. That’s held growth in check, with Asia-Pacific as the biggest untapped market. Financials [Netflix FInancials] Source: Stock Analysis Up until the pandemic, Netflix pulled in revenues north of 20%. Interestingly, 2020 was the first time it saw sales slip below 27% since 2015. Margins maxed out in 2021, when gross margins were at their highest, and have fallen since. The company generated a huge amount of cash from operations, $3.23 billion in the last twelve months, with Capex limited to $349 million. However, the company has spent $632.9 million on acquisitions last year. Currently, it holds $7.8 billion in cash on its balance sheet against $14.0 billion in long-term debt. Valuation [Netflix Valuation] Source: Seeking Alpha Compared to its peers, Netflix isn’t ridiculously expensive. For example, it trades at a lower P/E than Disney (DIS), but higher than Paramount Global (PARA). Its price-to-sales is twice that of the closest competitor, but its price-to-cash flow isn’t as outrageous as PARA or Roku (ROKU). Still, none of these are what we’d considered cheap. Growth [Netflix Growth] Source: Seeking Alpha While Netflix delivered outstanding revenue growth in the past, its forward look is one of the lowest amongst its peers. Plus, it’s struggling on earnings with negative EBITDA growth YoY. The only real plus is its free-cash-flow growth. Profitability [Netflix Profitibility] Source: Seeking Alpha Netflix runs a gross margin in line with its peers, though its EBIT, EBITDA, and net income margins are superior. It also boasts the best return on equity, assets, and total capital of the group. [Bear market expert makes new prediction]( Nobody believed Larry Benedict’s prediction in February 2020. The DOW plunged 3.5%, and he told CNBC, “It seems like there’s much more to come.” Within a month, the market plummeted 34%. Then, nobody believed Larry at the start of last year, either. He predicted that “all the indexes will be negative for the year,” with the Nasdaq leading the way. Once again, he was spot–on. Anybody who followed his recommendations could be well in the black. Now, for the first time, Larry’s coming forward to share a brand–new forecast. [Click here to watch his interview right now.]([Ad] Our Opinion 4/10 Netflix is a mediocre value in an overpriced group. The company’s growth is questionable, and we don’t see a pathway to either improve margins. We think Bob Iger might have taken the right path with Disney, reducing its spend on streaming to focus on its core businesses. That isn’t an option for Netflix, who we expect to struggle for several years. 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All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions.