Netflix: In the Spotlight

03/06/2018 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

Netflix (NFLX) is one of the Cabot Top Ten Trader All-Stars, with 46 appearances since its debut in 2003. That’s a long time for any company to stay at the top of the heap for growth stocks, which is what a Top Ten appearance means, explains Mike Cintolo, growth stock expert and editor of Cabot Top Ten Trader.

And the reason Netflix has stayed on top is clearly the leadership of Reed Hastings. He’s the one who pioneered DVDs by mail (when everyone thought it was impossible) and it was his decision to start streaming content online.

And Hastings made the decision to start producing original content that resulted in blockbuster programs like House of Cards and more recently the film Bright and the second season of Stranger Things. Netflix is so popular that virtually every smart TV sold in the U.S. has its software built in, and the company is in advanced negotiations to have Netflix built into set-top boxes.

The company has over 117 million members in over 190 countries, and got $948 million of its $2.35 billion in streaming revenue from subscriptions outside the U.S. The company is actively negotiating access to more countries all the time.

Netflix’s 33% revenue growth in Q4 was the sixth straight quarter with revenue expansion of 30% or more and the 173% jump in earnings made five of the last six quarters with triple digit growth in EPS. The Q4 earnings report caused a major gap up on huge volume. Netflix can still surprise investors, even after more than 15 years.

NFLX has its moment in the spotlight and its time in the shade. The stock’s last major pause was from August 2015 (when it topped out at 129) to January 2017 when it finally got on top of $130 for good. NFLX took a smaller break from late July 2017 through the end of the year.

But NFLX advanced from $196 to $228 ahead of earnings and then gapped up 250 on January 23. The market weakness pulled it as low as $236 on February 9, but during the market’s recovery, NFLX has pushed out to new highs, and looks like a good buy on any normal weakness.

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