Netflix Inc.'s (NFLX) - Get Report  recent price hikes could end up being a very good thing for the company and its stock. But there are risks that could ultimately prove to be under-appreciated. 

Here arefour things to consider before making a decision on buying Netflix for 2019. 

1. Estimates Rising, Stock Falling

Netflix Inc. (NFLX) - Get Report stock is down 7.4% since its January earnings report (as of January 24). Of course, the stock rose considerably before earnings precisely because of the subscription price increases. But the earnings report was almost as much as investors could have asked for, both on a quarterly basis and a forward-looking basis. While revenue missed expectations slightly ($4.18 billion actual v. $4.2 billion expected), earnings-per-share surprised (30 cents v. 24 cents). Net subscriber additions surprised to the upside, with the ever-important international adds coming in at 7.31 million, against estimates of 6.1 million. 

2. Can Netflix Get to Free Cash Flow Positive?

International subscriber additions guidance for the first quarter of 2019 came in well above Wall Street's estimate, at 7.3 million, beating analyst expectations of 6.37 million. The international market is what's really important for Netflix, which has solidified its stronghold in the U.S. This comes even as Netflix raises prices for U.S. subscribers, effective immediately for new subscribers and over the next three months for current ones.

U.S. subscriber additions guidance for the upcoming quarter did come in at 1.6 million, below analysts estimates of 1.86 million. But analysts see the price increases as ultimately adding to Netflix's revenue and earnings. 

Netflix raised prices between 13% and 18% just ahead of its earnings results. Wall Street loved it. The belief is that, since Netflix has one of the best quality and most wide-ranging content slates offered largely at competitive prices, the price increases can only accelerate revenue growth.

Even if it loses some subscribers, the price increases should increase revenue, perhaps by more than $1 billion a year. Fourteen Wall Street analysts raised their price targets on the stock the day after the earnings results came out.

The idea is that operating margins would expand (management wants that margin to hit 13%, up from the 11% now), giving more credence to the popular Wall Street belief that Netflix's free cash flow will turn positive in the next one to three years. Netflix burned through $3 billion in 2018 and said it expects to burn a similar amount in 2019. But it indicated that its free cash flow will improve each year subsequently, assuming it doesn't do any material transactions, as its higher margins will allow it to fund more of its investment needs internally.  

This all makes sense. Netflix has always been willing to spend big dollars for great content inventory and to win bids for top talent, allowing it to attract more subscribers. With the price increases, Netflix still offers its standard subscription plan at around the same price as other players in the space.

Naysayers are worried that the debt required for these ambitions is burdensome, among other concerns. Netflix's long-term debt is about twice its book value, but only about 7.3% of its market cap, so unless it sees a huge collapse in its earnings multiple, its ability to borrow won't get hurt all that much.

Netflix did see a huge trailing multiple compression to end 2018. When it was sold off along with the broader market, its trailing multiple fell to 187 from 250. But with the stock now trading at $327 a share and a trailing multiple of 116 -- and more importantly a forward multiple of 48 -- the stock could be a great pick for 2019.

3. Beware of Competitors Like Hulu

There are several headwinds to Netflix's growth story that investors need to pay close attention to. 

First, let's start with Hulu. Walt Disney Co.'s (DIS) - Get Report Comcast Corp.'s (CMCSA) - Get Report , and Twenty-First Century Fox Inc.'s (FOXA) - Get Report Hulu just announced it's cutting prices on its most basic plan by 25%, putting it mostly below Netflix's prices. Even if Netflix's value proposition is still superior to Hulu's, it just got a bit less so. 

Second, it's not just Hulu that Netflix investors have to watch out for. There's Disney's direct-to-consumer platform, to be launched in September of 2019. And Inc.'s  (AMZN) - Get Report Amazon Prime video platform is one of many draws of the e-commerce giant's Prime membership. All of these players have big pockets and cleaner balance sheets than Netflix has, and could compete for top producers of original content. 

You might ask, "didn't we know that already?" Well, the landscape has changed a bit since Netflix hit an all-time high of $411 in July of 2018. The Hulu price cut is brand new. Disney announced its own direct to consumer platform in August. And Disney's acquisition of several Fox assets was recently completed, and in time, the deal has made Disney's intention to focus on digital and streaming very clear. 

Netflix's big opportunity is in netting international subscribers as broadband adoption in many parts of Europe, Asia, and Latin America catches up to the U.S. Netflix's brand strength is great at home. Now, it will have to recreate the same level of brand awareness abroad and spend some marketing dollars abroad, which is likely a factor pushing back its projected date for turning free-cash-flow positive.  

4. What's a Fair Price to Pay for Netflix? 

Netflix's growth story looks nice, but the unknowns are aplenty. Still, the earnings multiple is far lower than the market is capable of pushing it to. But what's not yet one hundred percent clear is where Netflix's earnings multiple should really be.

In a perfect world, buying broad-based exposure to digital streaming could be a good play, so long as investors get in when expectations aren't getting incredibly stretched. But there isn't an ETF specifically for streaming, probably because Hulu isn't publicly traded (it's owned by larger media companies), Disney's DTC platform of course is owned by Disney and YouTube TV is owned by Alphabet Inc.'s (GOOGL) - Get Report Google. That means there's insufficient visibility into these players' performance, since those platforms don't account for the majority of their parent companies' revenue streams. 

It might be best to buy Netflix now, as it's down of late, but don't buy too much. Good old nibbling at the stock might be a good play. Growth stocks are in a tricky situation right now, as the economy looks to be at or falling off of its peak. 

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