- Netflix’s leadership in streaming, robust first-party content, and tech-first approach justify a buy rating, despite competition and high valuation.
- Recent earnings show strong revenue and EPS growth, with increased subscriber additions and ARPU, supporting positive full-year guidance.
- The firm is expanding into advertising, with 45% of new sign-ups choosing ad-supported options, aiming to diversify revenue streams.
- Key risks include high valuation, competition, and the need to develop advanced advertising technology, but Netflix’s history of execution inspires confidence.
Introduction
Netflix (NASDAQ:NFLX) is the global leader in streaming video on-demand or SVOD. The firm has close to 280 million global subscribing households and given the average household size is likely greater than two, this means the company reaches close to 600 million end users.
The firm is an iconic brand whose history was forged in the disruption of linear TV. Originally the firm licensed content to stream over the internet but since 2013, in an initiative led by current co-CEO Ted Sarandos, the firm leaned into creating first party content. This initiative was massively successful, leading to hit shows such as Stranger things, Black Mirror and Narcos which have proved essential for growing a loyal and sticky user-base.
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