Netflix Shares Collapse: 7 Companies To Watch

Netflix (NFLX) reported quarterly results that added angst, uncertainty, and worry for investors. Shares gained buyers after being touted as a favorite bullish position for Hedge Fund manager Whitney Tilson.

The Good News
  • Netflix added 2 million new subscribers worldwide
  • Total subscribers rose to 29 million, with 25.1 million from the United States
  • Net income was 8 million
  • Company reiterated it was committed to original programming

…and the Bad News
  • DVD subscriptions declined from 9.24 million in the previous quarter to 8.61 million in the quarter
  • Original programming will mean negative free cash flow for the next several quarters
  • Competition from HBO (TWX) and Amazon (AMZN), and Hulu in online streaming is growing
  • Content liabilities now total $5 billion
  • $2.1 billion in liabilities is due in 12 months

Analysis

Investors should take note of the negative cash flow, deterioration in profit margins, and unknown obligations. Netflix said the liabilities did “ not include obligations that we cannot quantify but could be significant.”

Netflix forecast it will lose between $2 million and $13 million next quarter.

Valuation

Using Kapitall tools, Netflix has a Price of Profit (the amount you are paying for $1 of next year’s profit) of over 70. Its Book Value per Share is $12.39, Price to Book Ratio is 5.5x. The P/E is 38.2x.

Business Section: Investing Ideas

To evaluate the future prospects for Netflix further using Kapitall’s tools, below is a related list of companies to look at.

Online Streaming:

 

1. Netflix, Inc. (NFLX): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap at $3.34B, most recent closing price at $60.12.

2. Amazon.com Inc. (AMZN): Operates as an online retailer in North America and internationally. Market cap at $103.29B, most recent closing price at $228.49.

3. Pandora Media, Inc. (P): Operates as an Internet radio company in the United States. Market cap at $1.57B, most recent closing price at $9.29. Pandora is not a direct competitor for Netflix, but its offers online music streaming.

 

Content:

 

4. Time Warner Inc. (TWX): Operates as a media and entertainment company in the United States and internationally. Market cap at $41.76B, most recent closing price at $44.01.

5. Walt Disney Co. (DIS): Operates as an entertainment company worldwide. Market cap at $90.88B, most recent closing price at $50.65.

6. CBS Corporation (CBS): Operates as a mass media company in the United States and internationally. Market cap at $21.17B, most recent closing price at $33.07.

7. Comcast Corporation (CMCSA): Provides entertainment, information, and communications products and services in the United States and internationally. Market cap at $97.45B, most recent closing price at $36.42.

 

 

Written by Kapitall’s Chris Lau To interact and discuss these picks with users, attach your watch list or portfolio to your friends on Kapitall. To connect with users on the  leaderboard: on  your tool bar, select  Get Connected  -> Top Kaptallists.

Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed at the Kapitall store.

 

 

Analyze These Ideas: Getting Started

 

 

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