First let us look at the quarter that Netflix delivered today. The company posted first-quarter earnings of 38 cents per share, versus estimates for 69 cents. Revenue totaled $1.57 billion, which was in line with estimates. Netflix said earnings would have been 77 cents a share, excluding a foreign exchange loss.
However subscriber growth beat expectations adding 4.9M subscribers versus the expected 4.1M subscribers. International subscribers growth has been strong. The stock is up 13% after hours.
I for one believe that Netflix value is not in the financials it delivers. It might be in the brand, it’s stickiness and the potential to be a ubiquitous content delivery platform. The bottom line question is “Is Netflix a media company or tech company?”. Can it be a entertainment platform?Netflix is cool among kids and teenagers which is huge.
I think that there are network effects present for Netflix and they are generated through the content on the platform. I have heard seven year olds associating their favorite show and associate it with Netflix, even though that show is not Netflix’s original content. I was part of office break room discussions on House of Cards and Marco Polo. As Netflix produces more original content or delivers other producers original content the stickiness only increases.
The millennials will cut the chord, there is not doubt about that. But I have hard time imagining they would do it without having Netflix. The strong subscriber growth attests to the fact that Netflix is fast becoming a default subscription a household might have.
If you consider Netflix a platform and if you imagine content chasing the platform then on a relative basis Netflix is worth way more than $30B it is worth even after A/H spike today.