Netflix: The King of Content
It may not be a surprise to anyone now that Netflix (NASDAQ:NFLX) has become the king of content and one of the top MegaTrend stocks in my portfolio.
NFLX stock checks all the boxes. It’s a proven leader in content creation and delivery. It’s well run and continues to grow its global platform while strategically avoiding certain countries that can create more challenges than profits.
It continues to focus like a laser beam on its mission. It doesn’t have several operations doing various things within its operation. It seeks to provide the best in class streaming content platform that’s available.
Most of its rivals in this space deliver a streaming content platform, but they don’t rely on that as their sole existence. That means there is a competition of resources for that division, and it doesn’t always win.
If you’re Disney (NYSE:DIS), for example, you have merchandise, theme parks, movies, shows, etc. Much of the content is driven by legacy content that it has monetized, and even if that division does well, it doesn’t necessarily translate that the entire company succeeds. Each division is a hedge on a bet on another division.
222 Million Strong
More to the point, many analysts are constantly talking about how DIS is going to steal market share from NFLX. Yet, when you ask analysts about how Tesla (NASDAQ:TSLA) has such a massive market cap relative to its car production and the growing number of competitors…well, then it’s a different story. The point is, NFLX has more than double the number of subscribers to its platform than DIS does, and DIS has a specific demographic that it caters to, so controversial subjects and content are kept to a minimum because it rarely goes off-brand.
NFLX isn’t constrained by those kinds of issues. It simply provides the quality content it can, and every year it spends billions on it. Last year, it spent $17.7 billion on content. It hasn’t disclosed what it will do this year.
NFLX has built a global network for content that continues to outpace its competitors, and it continues to find new ways to break into new markets. For example, in India, most consumers can’t afford what NFLX charges in the US, so it set up a new payment structure. In Kenya, it offers a free service.
Source: About Netflix
NFLX has this success without even entering the Chinese market. When it was choosing a new, big Asian market, it chose India instead. The pricing model was more challenging, but it knew there would be political distraction about the content it distributed in India. Plus, India has a huge amount of quality content, and many shows are already in English.
MegaTrend Stocks Have Troubles Too…But Not For Long
Currently, NFLX stock has lost 42% year-to-date. There are a variety of reasons for this – a subscriber boom during the pandemic, competition, investing cycle shift, etc. – but that is all in the past. Remember, MegaTrends aren’t about events. They’re about long-term, ineluctable trends.
If you simply look at that chart, you see which way this trend is heading.
NFLX has targeted Q1 subscriber growth at 2.5 million. Its subscriber growth in recent years averages around 8.4 million. It’s likely that it picked a lower number that it knew it could reach, rather than reach for a number it could miss and then be punished even more by the market.
Also, all the big tech leaders have been hit in this sector rotation out of tech, but now the leaders, like NFLX stock, are bouncing back. Q2 may well be the quarter where NFLX stock gets back on track. That means now is a great time to buy this massively discounted over-achiever. Don’t let this opportunity pass you by!
The MegaTrend Stocks Await in Proffe’s Trend Portfolio
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