Netflix Is an Even Better Deal Right Now
This four-quarter earnings recession isn't all bad news if you've kept some cash handy to pick up great stocks that shortsighted investors kicked to the curb. Digital streaming kingpin Netflix is just such a stock. It had, on balance, a good quarterly report. Sales increased 28% year over year, earnings rose a full 55% to $0.09 per share, and revenue held no surprises, while profits and earnings came out much better than expected.
But the company's own subscriber growth targets (2.5 million) turned out to be a bridge too far. The firm reported it added "just" 1.7 million new subscribers. Investors badly overreacted, sending the stock plunging by more than 14% at one point yesterday and generally attaching far too much significance to the miss. At the same time, they overlooked the really important context, that the growth Netflix did enjoy happened in an atmosphere of steeply rising subscription prices.
Subscribers are buying in; investors aren't. In other words, the markets - already on a shaky basis with reality - took a reason to be supremely confident in Netflix's fundamentals and interpreted it as a reason to run in the opposite direction. Their loss entirely. Our recommendation is that this company is a strong "Buy" at these prices, and we'd love to grab even more if the shares continue to slide today.
