Netflix, Inc. (NASDAQ: NFLX)
Netflix is a stock that has the ability to invoke quite a bit of emotion. In fact, in the service sector, there are few other stocks that are as heavily debated as this one. Today, we’ll talk about the bearish argument, the bullish argument, and why I believe that NFLX is going to soar moving forward.
The Bearish Argument On NFLX
While I do believe that Netflix is going to climb ahead, I will say that the bears have a very valid argument when it comes to the stock. The argument is two-fold:
- US Sales – The first and, perhaps, most important part of the bearish argument has to do with sales growth right here at home. NFLX started in the United States and, when it did, it took off. However, more recently, it seems as though the market is saturated, as user growth on the streaming video app has started to plateau. The bears argue that this is a sign that the stock is going to head downward ahead.
- Competition – The bears also point to the growing competition in the streaming video industry as a reason for coming declines. In fact, they argue that it could be this competition that’s leading to declines in user growth, which could make the stat a bit more grim. It’s hard to deny that NFLX has more competition today than ever before. After all, even Twitter is trying to break into the streaming video space.
The Bullish Argument On The Stock
While the bearish argument with regard to Netflix comes with some very valid points, the bullish argument is also a very strong one. Here’s how the bulls see it:
- Maintained Large Market Share In The United States – First and foremost, the bulls don’t argue that user growth is slowing in the United States. However, they point to the fact that, in the US, NFLX is still king. The company maintains a leading market share in the streaming video space and will likely continue to do so for the foreseeable future.
- International Opportunities – Another important factor here is the international opportunities the company has opened up. Late last year, we learned that NFLX was going global. The bulls argue that the global prospects in this industry are so large that declining user growth in the United States is likely to be completely absorbed, and then some, by revenue generated internationally.
- Disney – The final piece to the bullish argument is one that comes into full swing next month. You see, a few years ago, Netflix set up a deal with Disney. Under the deal, the company was given permission to stream Star Wars: The Clone Wars. However, the deal was written in a way that would give NFLX the right to stream more and more exclusive content over time. For example, the company is currently allowed to stream Disney/Marvel-owned assets like Jessica Jones and Daredevil. However, in September, this contract will open up in a big way. In September, NFLX will be the exclusive streaming partner for first-run theatrical releases across Disney Studios. This includes assets from Pixar, Disney Animation, Disney Pictures, Marvel, and LucasFilm. Considering the popularity of Disney films, the bulls argue that this will send user growth skyrocketing and help to maintain the users already on Netflix.
Why I See A Tremendous Opportunity Here
The reality is that, while there is some downside risk, there is always downside risk associated with investing. In the case of NFLX, the bearish opinions on the stock have caused it to stay at a relatively low valuation recently. However, the bulls have very valid points. At the end of the day, international trends will likely lead to revenue growth, and the Disney deal is incredible for user growth and retention in the United States and around the world. All in all, while there is some risk here, I’m expecting to see long-run gains.
What Do You Think?
Where do you think NFLX is headed moving forward? Join the discussion at TalkTRENDZ!
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