This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Microsoft vs. Netflix

NEW YORK ( TheStreet) -- For the life of me, I can't understand why anyone would be willing to buy a stock like Netflix (NFLX - Get Report), which is selling for over 37 times current earnings and a jaw-dropping 73 times forward (one-year) earnings.

Don't misunderstand me. I'm one of Netflix's satisfied customers as it's one of the only sources of virtually all great movies that were made in the past 60 years that a person could want to rent.

Even though the stock price has been cut by more than half from its $133.43 52-week high, it still seems expensive to me. Perhaps that's why CEO Reed Hastings doesn't appear to own any shares of his own company's stock.

In fact, none of the leading officers except Chief Products Officer Neil Hunt have much of a stake in the ownership of NFLX. Hunt, as of Jan. 1, owned 74,527 shares, which at today's stock price is valued at around $4,870,339.

In all fairness to Netflix, it does have a remarkable brand name and great loyalty among its faithful users. Having close to 25 million subscribers worldwide is nothing to sneeze at, and its nearest competitor, (AMZN) through its "Amazon Prime" service, has yet to get its act completely together.

Yet, incessant rumors and suggestions persist that NFLX's business is experiencing a slowdown. Its dominance may also be encroached upon by other emerging competitors including Coinstar (CSTR), which gives more reasons for shareholders to sweat with concern.

Amazon has tremendous resources to cash in on Netflix's vulnerability and with enough effort could duplicate what NFLX offers its subscribers. The competition could lower Netflix's revenue and earnings potential.

As of June 30, Netflix reported its year-over-year quarterly earnings had plunged 91%. Added to this is the worrisome reality that its operating margin is a pitiful 5.26% and its profit margin an even lower 2.87%.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NFLX $90.03 -0.28%
MSFT $49.87 -0.06%
AAPL $93.74 -1.15%
FB $117.58 0.73%
GOOG $693.01 0.29%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs