Netflix: The King Of Streaming Faces Challengers

Quick Summary

Netflix (NFLX) provides an internet-delivered content streaming platform. Customers pay a monthly subscription fee for unlimited streaming access. As of mid-2020, Netflix has about 196 million subscribers in 190 countries, about 60% of which are outside of North America. The platform boasts about 14,000 TV and movie titles, including over 1,500 original titles, across its different geographies.

Does The Company Have Recurring And/Or Rising Revenues?

YES. Netflix's services are subscription-based and wholly recurring, with most estimates indicating about 90% renewal rates. Netflix's 3-year average revenue growth is over 30%, as the company has moved rapidly into international expansion and pushed through subscription price increases averaging 3-5% per year. Subscription count continues to grow at 20-25% year-over-year, and there should be plenty of growth remaining, especially internationally (over 60% of U.S. households already subscribe). Still, it is unclear how many years of 20% growth Netflix has remaining, especially considering the increasingly strong competitive picture.

Does The Company Have Durable Competitive Advantages?

SOMEWHAT. Unlike most business-to-business services, we don't feel that Netflix has much in the way of switching costs. It is very easy for consumers to cancel and use an alternative offering from Amazon, Hulu, Disney, or a variety of others. Netflix has developed a strong CONSUMER BRAND that gives it leading mind-share, and by developing its own popular and critically acclaimed series has begun to gather a UNIQUE ASSETS moat. We don't feel either of these are insurmountable by competitors, and barriers to entry are fairly low in the streaming content space. To this point, consumers have shown a willingness to pay for 3 or more streaming services, so competition has not been as impactful to Netflix as many expected.

GreenDot Rating: YELLOW

Netflix gets a YELLOW (somewhat attractive) rating. Its recurring revenue model and still-good growth prospects, along with a universally known brand and the beginnings of a strong content library, make it a stock worth considering. The competition is strong and ever-expanding, from direct competitors (Amazon Prime Video, Hulu, Disney+, Comcast/NBC's Peacock, Youtube Premium), to alternative forms of streaming entertainment (like TikTok or standard Youtube). Netflix's lead is not insurmountable and the firm will face challenges continuing its growth trajectory in a profitable way.

Disclaimer: The content is provided by Alexander Online Properties LLC (AOP LLC) for informational purposes only. The material should not be considered as investment advice or used as the basis ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.