Online streaming giant Netflix is one of the top internet stocks across the globe. Shares of the media company have soared 125% in 2015, 13% in 2016 and 55% in 2017. The stock is already up over 80% in 2017. Shares of Netflix peaked to an all-time high of $423.21 last month and have since declined after it released its Q2 2018 earnings results.
Why Did Netflix Shares Decline Recently?
Though Netflix beat earnings estimates, it reported Q2 revenue below analyst projections. Netflix also added 5.2 million new subscribers in the second quarter, below estimates of 6.2 million in Q2. In the United States alone, Netflix added 700,000 subscribers which were below the estimated figure of 1.2 million.
At the end of Q2, Netflix had 130 million subscribers, an increase of 25% year-over-year compared to 104 million subscribers at end of the second quarter in 2017.
Has User Growth For Netflix Started To Decline?
In the last seven out of the nine quarters, Netflix has been able to beat user forecasts. The last time Netflix reported user subscription below estimates was in Q1 2017 when it added 5 million users, compared to a forecast of 5.2 million. What’s more, Netflix expects to add 5 million subscribers in Q3 including 650,000 in the United States. This indicates an addition of 4.35 million global subscribers.
Netflix has stated that its subscriber base can grow between 60 million and 90 million in the United States, indicating an addition of approximately 30 million subscribers at the high end of its projection. After significant expansion, Netflix now has approximately 57 million domestic subscribers. With this comes the hiccup – it has practically no room to grow subscribers if we take the conservative estimate of 60 million subscribers.
The company is also facing challenges by bigger players with more cash in hand such as Amazon Prime and Amazon Studios. Further, Disney is looking to launch its streaming platform in 2019.
Key Drivers For Netflix
Yes, Netflix’s stock has been negatively impacted post Q2 results. But Netflix’s growth story is far from over. The company expects revenue to grow by 33.6% in Q3 with earnings growth of 134%. Netflix again expects to add 5 million subscribers in Q3.
Netflix can approximately double its subscriber base to 250 million over the next 10 years, given the total available market. Netflix currently has 300 million user profiles across 450 million devices.
There are growth opportunities in emerging markets like India where Netflix has about 5 million subscribers compared to the market leader Hotstar which has 75 million subscribers. The Indian online streaming market is estimated to grow by 35% year-over-year. Netflix has been targeting market share by generating original content.
The first two seasons of Narcos scored massive hits while Sacred Games has also been popular among the Indian audience. Production on the first Arabic series Jinn has reportedly begun. Netflix will be spending around $8 billion in original content for 2018.
Though there are concerns over Netflix, the company’s revenue is still estimated to grow by 35.6% in 2018, 24.8% in 2019 and 21.6% in 2020. Comparatively, its bottom line or earnings is estimated to grow by 116% in 2018, 61.9% in 2019 and at a CAGR (compound annual growth rate) of 62.5% over the next five years.
Does This Provide An Opportunity For Investors To Buy Netflix?
Although Netflix has generated spectacular returns over the last few years, potential investors might be wary about entering at current levels. However, the recent stock decline post Netflix’s quarterly results indicate that the stock is trading at a discount of over 10% to average analyst price targets of $377.60.
Out of the 40 analysts tracking Netflix, 60% of analysts (or 24 analysts) recommend a “buy” while 35% recommend a “hold” and only 5% recommend to “sell” the stock. Netflix has a high 12-month price target estimate of $503.
FAANGs Lose Over $135B Overnight
The stock market was in a sea of red yesterday. The broader markets witnessed yet another correction. Stocks such as Facebook [FB], Apple [AAPL], Amazon [AMZN], Netflix [NFLX] and Google [GOOG], also known as FAANGs led the sell-off yesterday.
FAANGs lost over $135B in market value overnight. Analysts have raised concerns over Apple’s iPhone unit shipments. Several of them have cut iPhone shipment estimates and this has driven Apple shares lower.
Apple’s market cap has fallen from a high $1.1T to its current value of $882B. During its last earnings call, Apple had also stated that it will no longer provide data for device sales further adding fuel to fire.
Facebook trades at a two-year low
Facebook shares continue to burn investor money. Shares are down 13% this month and 20% since Oct. 2018. Facebook shares have impacted after an investigative report by New York Times accused the former of promoting anti-Semitic conspiracy theories.
Amazon shares fell declined over 5% yesterday. The stock faced the wrath of investors as it missed revenue forecasts last month. Netflix, on the other hand, has slumped over the last few months as there are concerns over the company’s international expansion efforts.
Have FAANG’s bottomed out?
FAANGs drove the markets for several years and generated spectacular returns for investors. A focus on developing innovative products and services have ensured market leadership for FAANGs.
However, since Oct. 18, these shares have declined significantly. FAANGs have lost a whopping $700B in market cap over the last 50 days. Does this mean that FAANGs have bottomed out and are trading at attractive valuations?
It’s too early to tell. We have seen that concerns over iPhone device sales, Facebook controversies, and decelerating growth for Amazon and Netflix have weighed in on stocks. Investors are now paying attention to fundamentals in an uncertain macro environment driven by rising interest rates and the trade wars between China and the United States.
Does this mean that the party is over? Certainly not! These companies are leaders in innovation and are expected to launch products and services that will help them maintain revenue growth in the near future.
Analysts though are still bullish on FAANGs. They have a 12-month target price of $233.47 for Apple, implying an upside potential of 26%. Similarly, shares of Facebook, Amazon, Netflix, and Google are trading 50%, 41%, 48%, and 32% respectively below their target price estimates.
3 Ways To Invest From Your Smartphone For Under $5
The numbers say 80% of Millennials don’t invest in stocks.
Reason? Half say they don’t have money, one-third says it’s for “old white men,” another third says they don’t know how.
In addition to that, there’s demographic gap. “The average age of a financial advisor is 55,”Douglas Boneparth, a New York City-based financial planner last year. “There are more financial advisors over the age of 70 than there are under 30.”
Despite these beliefs, you don’t really need much money, nor experience, to get started. (Just look at our fearless co-founder Odunayo Eweniyi and what she’s pulled off here…)
Be that as it may, here are three ways to get started for $5 or less.
What: A micro-investment app (iOS and Android) with over 30 ETFs according to industry, sector and risk tolerance.
How it works: Download the app and choose your investment.
Minimum investment: $5
Cost: Fees range from $1 a month for accounts under $5,000 to 0.25% a year.
“We help people who don’t have a lot save money on a weekly basis,” CEO and co-founder Brandon Krieg said in one interview. “Stashers look like America, they look like people you meet every day: they are nurses and teachers and Uber and Lyft drivers.”
What: iOS and Android app.
How it works: Download the app and choose one of six index funds. When you buy, say a cup of coffee for $1.75, it rounds up the change to $2 and deposits the difference.
Minimum investment: $5
Cost: Just like Stash, fees range from $1 a month for accounts under $5,000 to 0.25% a year.
“We’re not trying to preach austerity to the client, because that’s a bummer,” CMO Manning Field says. “Some people will say, ‘Don’t have the cup of coffee.’ We’ll tell you to have the cup of coffee and invest along the way.”
What: A commission-free investment app (iOS and Android).
How it works: Download and start buying stocks.
Minimum investment: Whatever stock you want to buy.
And by the way, if you want to get a fast start on real estate, here’s Forbes’ list of nine REITs with yields between 8% and 10%.
Analyst: ‘Bitcoin Just Collapsed Like A House Of Cards…’
Oh, how the mighty have fallen.
Ever since their mighty peak back in December, Bitcoin has seen a consistent plunge all year long, briefly dropping under $5k a coin today.
“Bitcoin collapsed like a house of cards on Monday,” Lukman Otunuga, research analyst at FXTM, wrote Business Insider in an email.
In fact, today’s drop continues a filthy week for Bitcoin, which has now dropped to a low not seen since December, right before the wicked explosion in prices that had Bitcoin as high as $20k per coin.
Once that happened, Bitcoin basically went mainstream, with “Blockchain” and “cryptocurrency” becoming words du jour. And once that happened, it basically created a frenzy around cryptos.
Just peep this. It’s not even a hockey chart, it’s just insanity.
Aaaaaand, here’s another showing the raucous trading activity back in December 2017.
All in all, Bitcoin lost 12% of its value in the past week and nearly 20% in the last three months.
For whatever it’s worth, it’s not just Bitcoin that’s taking a beating; other cryptos are getting slammed as well. Both Litecoin ($5.10 per coin) and Ethereum ($156/coin) are down 12%.
So, who else is bullish on crypto?!