NFLX

Icahn’s In-depth Letter to Apple Still Does Not Remove Time Horizon

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We believe Apple’s (AAPL) shares have valuation upside (see 16 page report), but as we have outlined before here, activist investor Carl Icahn’s proposal to force Apple to buy back stock over a certain time period (“during fiscal 2014”) as opposed to under a certain price (our fair value estimate) is imprudent. We encourage Icahn to further revise his proposal. Additionally, we think Icahn’s valuation process is too simplistic (see footnote 1), and we encourage him to disclose a more rigorous valuation assessment of the firm that takes long-term forecasts into consideration. Said differently, we’d like him to justify why Apple should trade for 16 times earnings on the basis of Apple’s own financials, not merely use the consensus market multiple for justification. … Read more

Disney Posts Solid 4Q Results; Sets Date for Star Wars Episode VII

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On Thursday, Disney (DIS) released better-than-expected fourth-quarter results. Revenue for the period jumped 7%, while segment operating income advanced 6%. Disney’s quarterly performance was led by accelerated growth in the company’s ‘Consumer Products’ segment (up 14%), though revenue expansion in the firm’s ‘Media Networks’ segment slowed to 1% in the quarter versus a 5% pace for the fiscal year. Segment operating income in the company’s ‘Media Networks’ division was the only segment to experience a decline, though we note that profits at the rest of the firm’s business segments performed incredibly well. Adjusted for the recognition of previously-deferred ESPN affiliate fee revenues (a transitory factor), however, operating income would have advanced in the company’s ‘Media Networks’ segment as well. Disney’s net … Read more

Don’t Take Our Word For It; Ask CEO Reed Hastings; Netflix’s Shares Are Overpriced

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We give Netflix (NFLX) CEO Reed Hastings a lot of credit. Not too many CEOs will go on record saying that its firm’s share price is being supported by “momentum-investor-fueled euphoria,” but he did. Netflix remains one of the most overpriced stocks on the market, in our view. Click here for that list — it’s near the top. Pasted below, please find the most important part of Netflix’s third-quarter shareholder letter (red circle added by us). If you understand anything about Netflix’s stock, it should be this: “In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.” Image Source: Netflix Share Price Performance Today Valuentum’s Take … Read more

Pay TV Is Getting Friendly with Netflix

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Since it successfully transitioned from a DVD rental service to a content streaming powerhouse, Netflix (click ticker for report: ) is now viewed as a major threat to pay TV. The story goes that consumers will eventually “cut the cord” and abandon pay TV while relying exclusively on Netflix and online video service Hulu for content. Though there are many reasons why we think this trend is overblown, Liberty Global’s (LBTYA) Virgin Media has taken another step toward eliminating this competitive threat: Virgin subscribers will be able to access a Netflix app via TiVo set-top boxes. Liberty Global is controlled by none other than media mogul John Malone. Malone is best known for his bold M&A deals throughout the years … Read more

Who Won? CBS and Time Warner Cable Strike a Deal

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Monday afternoon, content owner CBS (click ticker for report: ) and cable provider Time Warner Cable (click ticker for report: ) came to an agreement over retransmission fees, allowing CBS programming to resume for Time Warner Cable customers. The battle lasted for nearly a month, and as we predicted, the upcoming NFL season spurred a deal. We noted that anger from consumers regarding the situation seemed relatively subdued, but that can change quickly when a fan cannot view a game. Unfortunately, no exact details of the agreement are available, so determining a winner and a loser becomes more difficult. However, commentary from the CEOs of both companies suggests the deal was more favorable for CBS than Time Warner. CBS made … Read more

What’s Going on in the Time Warner-CBS Battle?

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A few weeks ago, CBS (click ticker for report: ) and Time Warner Cable (click ticker for report: ) took their disagreement over carriage fees to another level, as both firms’ existing carriage fee agreement expired, effectively blacking out Time Warner subscribers from viewing the network. Since then, we’ve seen really no signs of the companies coming to any sort of agreement. The Federal Communications Commission (FCC) warned on August 9 that, if the two firms didn’t reach an agreement, the government could get involved and force a resolution. Such an event would be an incremental negative to CBS because we doubt the FCC would see a reason why consumers should be forced to pay more for a network they … Read more

DirecTV’s “Miss” Mostly a Currency Issue

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Best Ideas Newsletter portfolio holding DirecTV (click ticker for report: ) reported strong second quarter results Thursday morning. Revenue increased 7% year-over-year to $7.7 billion, just a bit shy of consensus expectations. The disappointment in the period came from DirecTV Latin America, where revenue still advanced 12% year-over-year on a reported basis (constant currency revenue surged 26% year-over-year). Currency issues can be short-term headwinds, but we think the issues will even out in the long run. Earnings per share increased 8% year-over-year to $1.18, falling well short of consensus estimates. Again, we think this was largely due to currency issues. Free cash flow increased 15% year-over-year to $1.2 billion, equal to 15% of total revenues. In the US, revenue increased 5% … Read more

Netflix’s Second Quarter Was Fine; The Stock Is Just Expensive

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Content streaming service Netflix (click ticker for report: ) posted solid second quarter results Monday afternoon. Revenue increased 20% year-over-year to $1.02 billion, roughly in-line with consensus expectations. Earnings per share quadrupled year-over-year to $0.49, well above consensus estimates. The firm also generated positive free cash flow of $12.9 million, or about 2% of revenue. The format for the earnings call stole the show from the actual results. Eschewing the traditional call with analysts, Netflix instead had CEO Reed Hastings, CFO David Wells, and Chief Content Officer Ted Sarandos sit down with CNBC’s Julia Boorstin and Rich Greenfield of BTIG to discuss the results. While some may be upset with the exclusive choices, we do not have any problem with … Read more

Best Ideas Newsletter Holding DirecTV is on the Verge of Acquiring Hulu

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Key Takeaways: ·         Best Ideas Newsletter holding DirecTV could acquire Hulu in the ballpark of $1 billion. Though its earnings are undisclosed, we know Hulu posted $695 million in revenue in 2012, and people watched 24 billion minutes of entertainment on Hulu during the first quarter of 2012. ·         The acquisition keeps Hulu out of the hands of competitors. It also keeps Hulu out of the hands of companies that may want to enter the content distribution business. ·         The cord cutting trend is overblown, but we think Hulu is a nice hedge against cord cutting. We also think Hulu rounds out DirecTV’s TV Everywhere package. ·         Content costs could come down, and DirecTV is well positioned to benefit. We … Read more

Amazon’s Expansion Knows No Bounds

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On Tuesday, we received a variety of information about Amazon’s (click ticker for report: ) expansion into different product lines. The company is looking to expand its AmazonFresh same-day grocery delivery service and could enter as many as 40 markets this year. Additionally, the firm entered into the highest streaming content contract ever, purchasing the rights to stream over 4,000 episodes of Viacom (click ticker for report: ) TV shows. Let’s dig into the details. AmazonFresh For years, people have speculated that the end-game for Amazon was to build so many warehouses that it could effectively offer same-day shipping on any product and compete with brick-and-mortar shops on the basis of time. Thus, the expansion of AmazonFresh comes as little … Read more