NFLX

Microsoft Wants to Be the Apple of Your Living Room

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Earlier today, Dividend Growth Newsletter holding Microsoft (click ticker for report: ) finally unveiled its next generation console, the Xbox One. It wasn’t hard to tell that something big was around the corner for the next generation console, as the company had made some new hires including former CBS executive Nancy Tellem to head the firm’s content development initiative. Let’s take a look at the revelations and how it might impact the company. Steven Speilberg produces a Halo TV show As we mentioned earlier, Xbox’s move into exclusive content was not at all a surprise. In fact, we assumed we might hear about an exclusive TV show or movie even earlier. However, we were a little stunned to see legendary … Read more

Netflix’s Subscriber Growth Remains Fantastic

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Content distributor Netflix (click ticker for report: ) kicked off 2013 with strong growth in revenue, subscribers, and earnings per share. Revenue jumped 18% year-over-year to $1 billion, roughly in-line with consensus estimates. On the other hand, earnings per share generously exceeded estimates, moving from break-even to $0.31 per share. Further, the company added 3.05 million new streaming subscribers while losing only 3% of domestic DVD subscribers. Both domestic streaming and international streaming posted strong improvements in profitability and revenue. Domestic streaming revenue increased 26% year-over-year, with lower content costs driving a 630 basis point increase in operating margins to 20.6%. This resulted in an 82% increase in operating profit. In his candid letter to investors, CEO Reed Hastings cited strong … Read more

A Dish/DirecTV Merger Would Be Golden

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After a potential acquisition target of DirecTV (click ticker for report: ) was taken off the market, chatter of a DirecTV-Dish Network (click ticker for report: ) merger has escalated. The big obstacle, in our view, would be anti-trust hurdles, and given recent trends in US anti-trust regulation, that could be difficult to defeat. However, let’s take a look at what could happen if regulators allow it. Increased Leverage Over Content Creators One of the consistent themes we’ve been hitting on over the past year in the media space has been the rising cost of content. Netflix (click ticker for report: ), Coinstar (click ticker for report: ), Amazon (click ticker for report: ), Hulu, cable, and satellite are all … Read more

House of Cards – A Sign That Netflix Can Become a Content Creator

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Since activist investor Carl Icahn took a public stake, shares of Netflix (click ticker for report: ) have been on a tear. Shares really took off after the firm reported strong earnings for its fourth quarter and a bullish outlook for the first quarter of 2013. Shares have nearly doubled in 2013 alone, and it seems the market is getting even more bullish on Netflix. In our view, this has less to do with recent earnings trends, but rather, we believe the success of House of Cards has been a positive catalyst for the stock. The show has received fantastic reviews with an aggregate score of 9 on IMDB.com, and it has been mentioned in the same breaths as blockbuster … Read more

Netflix Surges on Strong Subscriber Growth

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Wednesday afternoon, DVD rental and video streaming service Netflix (click ticker for report: ) reported much better than anticipated fourth-quarter results. Revenue increased 13% year-over-year to $945 million, easily exceeding consensus expectations. Earnings surprised materially to the upside, coming in at a positive $0.13 per share compared to a projected loss of $0.12. The big shock during the quarter was the sequential acceleration in the streaming business, both internationally and domestically. Domestic subscriber additions during the quarter jumped 77% sequentially, to 2.05 million. Given the breadth and depth of its TV lineup, this shouldn’t be the surprise that it turned out to be. Netflix is quickly becoming a relatively strong substitute for cable due to its incredible amount of content, … Read more

Best Buy’s Holiday Sales Were Solid; Margins Are the Issue

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This morning, the maligned big box electronics retailer Best Buy (click ticker for report: ) provided updates on its holiday sales results, which were relatively strong, in our view. Breaking the downward spiral, same-store sales in the US were flat compared to last year, but continued to decline internationally, down 6.4% year-over-year. However, overall sales declined to $12.8 billion for the 9-week holiday season compared to $12.9 billion for the same period last year, suggesting overall business was fairly solid. Consistent with trends throughout 2012, consumer electronics were weak, while ‘Computing and Mobile Phones’ revenues surged. Source: Best Buy Holiday Sales Report, Valuentum Consumer electronics, largely comprised of TVs, has been weak and probably will continue to be until we see … Read more

Fiscal Cliff Averted; Aerospace Rallying

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After a volatile December, two of our favorite aerospace names, Astronics (click ticker for report: ) and EDAC Technologies (click ticker for report: ), are rallying significantly after a deal was finally reached to avert the fiscal cliff. Precision Castparts (click ticker for report: ), which had steadily moved higher during the fiscal-cliff ordeal thanks to optimism surrounding its planned acquisition of Titanium Metals (TIE), is also seeing strength today. We assumed both profit taking and overblown fears of defense cuts were the culprit behind the increased volatility, and it seems as though that could be the case. We continue to see substantial upside at these firms thanks to the massive, multi-year commercial aerospace backlogs of the large airframe makers. Our Best Ideas portfolio … Read more

You Are Ahead of the News As a Valuentum Member

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Remember When We Said Economic Prognosticators Were Off Their Rockers? From the September 2012 edition of our Best Ideas Newsletter (see page 2), released September 15, 2012: “Could you imagine if you had listened to bond-king Bill Gross (please note he is not the equity king), Marc Faber (author of the Gloom, Boom & Doom report) or the Economic Cycle Research Institute (ECRI), which called for a recession in September 2011 – some 30% in the S&P 500 ago (yes, 30%!). Aside from being incorrect, bearish economic prognosticators fully admit that their expectations have little to do with what may happen to the equity markets in the future (as Bernanke’s unlimited QE has shown). Still, such admissions do not stop … Read more

Disney Paints a Cloudy Picture for 2013

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Media giant Disney (click ticker for report: ) reported solid fiscal year 2012 fourth quarter results Thursday afternoon. The company saw revenue jump 3% year-over-year to $10.8 billion, a tad below consensus expectations. Earnings were in-line with expectations, increasing 17% year-over-year to $0.68 per share. Free cash flow, one of our favorite metrics when evaluating a company, fell nearly in half during the period to $602 million, though the decline reflected accounting timing more than any broader weakness. Fiscal year 2012 free cash flow jumped 22% year-over-year to $4.2 billion—enough to pay for the Lucasfilm deal on its own. Despite the hiccup in the current period, we expect free cash flow trends to remain strong at the media giant. On … Read more