Just like Amazon (AMZN) - Get Report , Apple (AAPL) - Get Report , and Facebook (FB) - Get Report , Netflix is a brilliant tech investment. The online streaming giant has blossomed into a $62 billion enterprise that delivers entertainment at your fingertips while enabling you to avoid expensive cable TV.
Here are a few reasons to buy Netflix.
We must first look at the fundamental idea behind the company. An increasing number of viewers have stopped channel-surfing and browsing the internet for entertainment.
Instead, they 'Netflix' it!
Netflix, which unlike Alphabet's (GOOGL) - Get Report YouTube is a paid service, delivers high-quality, ad-free content to users when they want it. Not surprisingly, viewers cumulatively watch 116 million hours of video every day on Netflix.
Entertainment viewing preferences are shifting. More people are trying to avoid the cost of gas, parking problems and crowds. There are also challenges like the weather. No wonder Netflix's shares have climbed every time there is a storm or a blizzard.
Netflix also has a healthy financial situation. Its balance sheet has about $3 billion in debt and $1.7 billion in cash, which is a manageable level of debt. As the company gets bigger due to global growth, its margins will improve and so will its profitability.
Netflix's stock has always been expensive. The promise of growth in Netflix has attracted investors given its five-year average return of around 800%.
Netflix is anticipated to grow earnings per share by 80% annually over the next five years. If a stock is expected to grow profits that fast, then the 72 times forward earnings valuation actually seems reasonable.
Led by CEO Reed Hastings and an aggressive market-share capturing strategy, the company still has the potential to build a truly global entertainment network.
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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.