More sur­prises as Net­flix stock price soars

Financial Mirror (Cyprus) - - FRONT PAGE -

This month, Net­flix an­nounced its big­gest pro­ject yet: a $30 mln satir­i­cal war film star­ring Brad Pitt, set to be re­leased on the online stream­ing ser­vice in 2016. But is Net­flix bit­ing off more than it can chew?

The com­pany’s stock has been trad­ing at an all-time high this week, peek­ing above $640, and some an­a­lysts are ques­tion­ing whether traders are set­ting the stage for the next tech­nol­ogy bub­ble. The fun­da­men­tal data how­ever, seems to tell another story.

There should be no ques­tion that what Net­flix is do­ing is rev­o­lu­tion­ary. The com­pany has cen­tred its en­er­gies around a key trend oc­cur­ring in the way peo­ple con­sume en­ter­tain­ment. Since the in­ven­tion of the tele­vi­sion, view­ers have tra­di­tion­ally sub­scribed to ca­ble ser­vices at­tached to their home tele­vi­sion sets. Yet with the in­tro­duc­tion of the In­ter­net, more peo­ple are turn­ing online to con­sume the movies and TV shows they know and love most.

Net­flix was the first com­pany to re­ally in­tro­duce the model of a sub­scrip­tion-based live media stream­ing ser­vice, and it did it on a big scale. Af­ter putting Block­buster out of busi­ness, Net­flix con­tin­ued to jump from strength to strength. In the last cou­ple of years, Net­flix in­vested sig­nif­i­cant funds in ob­tain­ing the rights to a wide se­lec­tion of films and TV se­ries. Not only that, Net­flix be­gan pro­duc­ing its own hit shows, in­clud­ing “Or­ange is the New Black,” “House of Cards,” “The Un­break­able Kimmy Sch­midt,” and many more.

Richard Ross, Ever­core ISI’s head of tech­ni­cal anal­y­sis, says the stock has fur­ther room to climb.

“I think the stock has another $90 of up­side,” said Ross. “That’s why I would still be a buyer to­day, even with the stock at a fresh all-time high.”

Ross is not the only one bullish on Net­flix these days. Michael Yoshikami, of CNBC, at­tributes the com­pany’s suc­cess to find­ing a niche, and beat­ing the com­pe­ti­tion.

“The rea­son the com­pany is do­ing so well,” writes Yoshikami, “is that it has es­tab­lished it­self as the lead player in a new un­bun­dled, mo­bile-com­mu­ni­ca­tion space, fo­cused on con­sump­tion of media on a va­ri­ety of de­vices. It’s a space that Hulu had claim to, but Hulu sim­ply did not ex­e­cute.”

The latest sta­tis­tics re­veal that Net­flix has ap­prox­i­mately 60 mln sub­scribers in over 40 coun­tries. The ser­vice’s suc­cess sug­gests that there is a gold rush of op­por­tu­ni­ties within this mar­ket. View­ers are watch­ing video ev­ery­where nowa­days. On the ride to work, or while wait­ing for meet­ings, peo­ple are find­ing it eas­ier and more con­ve­nient than ever to stream videos straight from their mo­bile de­vices or lap­tops.

So if you’re watch­ing the stock and not just the shows, re­mem­ber to con­sider the public sen­ti­ment as much as the tech­ni­cal data.

Johnny Car­son once fa­mously said: “If it weren’t for Philo T. Farnsworth, in­ven­tor of tele­vi­sion, we’d still be eat­ing frozen ra­dio din­ners.”

Per­haps if it weren’t for Net­flix, we would all still be sit­ting ex­pec­tantly in front of our tele­vi­sion sets, putting up with com­mer­cials.

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