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Netflix (NASDAQ: NFLX) has been one of the best stocks to own over the past decade, skyrocketing over 3,000% since September 2011. Streaming entertainment the company clearly did a lot of things right, and investors who got involved early were rewarded appropriately. But there may be some important data points that you don’t know about this. large cap business.
Here are five things you need to know about Netflix.
Image source: Getty Images.
1. The number of subscribers is huge
As of June 30, Netflix had 209 million subscribers worldwide, placing it ahead of any other streaming service. The company was first in the streaming space, giving it a leg up over traditional cable companies who didn’t take it seriously at first. Today, a plethora of options are on the market for viewers, but it might be too late to party.
These customers have helped Netflix generate $ 27.6 billion in sales over the past 12 months. And in the first six months of 2021, almost all of the company’s new subscribers have come from outside the United States and Canada. It relies more and more on international markets to drive its growth, and it is succeeding so far. Expect membership numbers to continue to increase over time.
2. The content budget is huge
For the whole of 2021, Netflix is ​​expected to spend $ 17 billion on content. Being able to spend more than its competitors is one of its main competitive advantages, as the 209 million subscribers mentioned earlier make it more economical per member. Over the three-year period from 2018 to 2020, the company allocated $ 38.7 billion in cash to bolster its offering of shows, films and documentaries.
And Netflix content is really good. At the 2021 Emmy presentations, the company took home an incredible 44 awards, highlighted by the monster success of the hit series. The crown and The Queen’s Gambit. This equaled a record held since 1974. It is no wonder that the company is able to steadily increase its prices over time, while also expanding its customer base. Creating a large collection of high quality exclusive content will give a solid pricing power to a media company like Netflix.
3. Netflix’s financial situation improves
Probably the most popular argument for Netflix is ​​when the company will start to generate positive results. cash flow. Well, in the Q4 2020 letter to shareholders, management mentioned that they will start producing free cash flow on a sustainable basis sometime past breakeven this year. In addition, the company no longer needs to raise external financing for its day-to-day operations.
Most notably, Netflix authorized $ 5 billion in share buybacks earlier this year, of which $ 500 million was used in the second quarter. As you can see, the company is turning the corner and is on the way to becoming a cash cow.
4. The economic model has demonstrated its optionality
In order to further improve its value proposition to subscribers, Netflix is ​​entering the video game market. By hiring alumni Facebook and Electronic arts Mike Verdu, the company will offer the mobile service only at no additional cost as part of its streaming video subscription.
And to establish a deeper connection with its most loyal fans, Netflix recently launched netflix.shop, an e-commerce site selling unique clothing and lifestyle products inspired by some of the shows and movies on the platform.
These initiatives show the company’s ability to continually increase engagement with its users.
5. The company is still managed by its founder
Reed Hastings, one of the founders, is still very involved today as co-CEO. And Ted Sarandos, the other co-CEO, has been with the company since 2000, just three years after its inception. Having leaders like these working with Netflix almost from the start helps the company stay focused on its overall mission of entertaining the world.
Hastings, both directly and indirectly (through his family trust), owns about 2.9% of the outstanding shares of the company. This stake is valued at around $ 7.5 billion today. Hastings ‘considerable in-game skin ensures that shareholders’ interests are aligned with those of management, which is why the stock has performed extremely well over time.
As these five crucial pieces of information prove, Netflix is ​​an exceptional investment.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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