NFLX

Netflix Continues Its Bid for Warner Bros. Discovery

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Image Source: Netflix By Brian Nelson, CFA On January 20, Netflix (NFLX) reported fourth quarter results that came in better than expected on both the top and bottom lines. In the period, revenue increased 17.6% year-over-year, while the firm crossed the 325 million paid membership milestone. Operating income increased 30% year-over-year, with its operating margin increasing roughly 230 basis points. Net income came in at $2.4 billion versus $1.9 billion in the year-ago period and diluted earnings per share came in at $0.56 versus $0.43 in the year-ago period. Free cash flow was $1.9 billion in the quarter, up from $1.4 billion in last year’s period. The results were driven by membership growth, higher pricing, and increased ad revenue. Management … Read more

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Netflix Reports Mixed Third Quarter Results

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Image Source: Netflix By Brian Nelson, CFA On October 21, Netflix (NFLX) reported mixed third quarter results with revenue coming in line with expectations, but GAAP earnings per share missing the consensus forecast. In the third quarter, revenue grew 17% due to membership growth, pricing adjustments and increased ad revenue, but its operating margin of 28.2% came in below guidance calling for 31.5% due to a $619 million expense related to an ongoing dispute with Brazilian tax authorities. Excluding this expense, Netflix would have exceeded its third-quarter operating margin forecast, and management noted that it doesn’t expect the matter to have a material impact on future results. Diluted earnings per share of $5.87 was better than the $5.40 mark it … Read more

Netflix Raises 2025 Revenue and Margin Guidance

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Image Source: Netflix By Brian Nelson, CFA On July 17, Netflix (NFLX) reported better than expected second quarter results with revenue and GAAP earnings per share beating the consensus forecast. The company grew revenue 15.9% in the quarter on a year-over-year basis, and its operating margin was 34.1%, up roughly seven percentage points on a year-over-year basis. Both revenue and operating income came in above its guidance due to foreign exchange and the timing of certain expenses. Net income came in at $3.1 billion in the quarter, up from $2.1 billion in last year’s quarter, while diluted earnings per share came in at $7.19, up from $4.88 in the second quarter of 2024 (+47% year-over-year). Netflix’s top line continues to … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Netflix’s Operating Margin Continues to Delight

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Image: Netflix has a long runway of growth given market share opportunities. By Brian Nelson, CFA On April 17, Netflix (NFLX) reported strong first quarter results with revenue and GAAP earnings coming in ahead of the consensus estimates. Revenue and operating income advanced 12.5% (16% on a foreign exchange neutral basis) and 27.1% on a year-over-year basis, respectively. Netflix’s operating margin increased to 31.7% from 28.1% in the year-ago period, while net income leapt to $2.89 billion from $2.33 billion in last year’s quarter. Diluted earnings per share increased 25.2% to $6.61 from $5.28 in the same period last year. Netflix’s performance was in part propelled by membership growth and higher pricing. Management continues to execute on its 2025 priorities: … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Netflix Records Biggest Quarter of Net Adds in Its History

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Image Source: Netflix By Brian Nelson, CFA On January 21, Netflix (NFLX) reported better than expected fourth quarter results with revenue and GAAP earnings per share coming in ahead of the consensus forecasts. In the quarter, revenue advanced 16% on a year-over-year basis (19% on a foreign exchange neutral basis), while the firm leveraged that top-line growth into a 52% increase in operating income. Its operating margin expanded 5 percentage points to 22% in the quarter. Diluted earnings per share came in at $4.27 versus $2.11 in last year’s period. Netflix added 19 million global streaming paid memberships in the quarter, the biggest quarter of net adds in its history, and finished 2024 with 302 million memberships. Netflix continues to … Read more

Netflix Continues to Deliver on Content and Engagement, Free Cash Flow Robust

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Image: Netflix’s shares are trading at all-time highs. By Brian Nelson, CFA On October 17, Netflix (NFLX) reported better than expected third quarter results with both revenue and GAAP earnings per share coming ahead of the consensus forecast. In the quarter revenue grew 15% on a year-over-year basis (21% on an F/X neutral basis), while the firm put up an operating margin of 29.6% versus 22.4% in the year-ago period. Global streaming paid memberships advanced 14.4%, to 282.72 million, as the firm recorded 5.07 million global streaming paid net additions on a sequential basis. Third quarter operating income advanced 52% year-over-year in the quarter. Net cash provided by operating activities was $2.32 billion in the quarter, while the firm hauled … Read more