Is George Soros Right to Bet So Heavily on Netflix?

Video streaming service Netflix's  (NFLX) third quarter earnings report was a disappointment. The company added fewer-than-expected U.S. subscribers in the quarter, delivering 7 cents per share (against analysts' expectations of 8 cents).

But investors don't seem to be scared -- the stock has risen over 20% in the last month. In fact, the stock has seen a 148% upswing over 2015 and at $126 is within spitting distance from its all-time high of more than $130.

Renowned investor George Soros and other hedge funds have embraced the Netflix story. This month, Soros reported that he owned 317,534 Netflix shares worth $32.79 million. Investment firms Viking Global and Renaissance Technologies also grabbed fresh stakes in the company. Should you follow Soros' lead? If you're an investor with an eye on long-term wealth building, Netflix appears to be a perfect core holding.

NFLX Chart NFLX data by YCharts
Even Time Warner's interest in Netflix rival Hulu, which is currently backed by Twenty-First Century Fox, Walt Disney and Comcast, hasn't taken the wind out of its sails.

That said, Netflix is an expensive stock right now, facing very high expectations. We examine the stock's pluses and minuses, to see if Soros made the right call.

Record-Shattering Usage

An RBC Capital Markets report, which surveyed 1,000 people, suggested that 51% chose Netflix for their television and film viewing.

This usage surpassed that of rivals YouTube, owned by Alphabet, and Amazon. The latter's "Prime Video" service is prohibited by Google's "Chromecast," and Apple's "Apple TV," slowing down subscriber growth. At 40 million subscribers, Netflix is clearly the leader in the market with no sturdy competitor (Hulu with a 9-million subscriber user-base has a long way to go).

Rapid Mobile-Data Proliferation

Ericsson, in its mobility report for the year, expects videos to dominate mobile data usage, with the medium gorging 70% of total data usage for the next five years. With Netflix expected to lap up 20% of this share -- coming second only to YouTube -- the company's ready to blaze a growth trail not just in the present but also into the future.

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