This is a step-by-step stock review to answer the question, is Netflix (NFLX) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
1. Netflix Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Founding Story: Netflix was founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California.
- DVD Rental Service: Initially, Netflix offered DVD rentals through mail-order, disrupting the traditional video rental industry.
- Subscription Model: Introduced a subscription-based model, allowing customers to rent DVDs with no late fees, offering convenience and value.
- Streaming Revolution: In 2007, Netflix launched its streaming service, enabling subscribers to stream movies and TV shows online, changing the way people consume entertainment.
- Original Content: Invested in original programming with shows like “House of Cards” and “Orange is the New Black”, becoming a content creator and reshaping the television landscape.
- Global Expansion: Expanded internationally, reaching millions of subscribers worldwide and becoming a leading streaming platform.
- Technological Innovation: Pioneered streaming technology advancements, optimizing video quality and user experience.
- Data-Driven Approach: Utilized data analytics to personalize recommendations and improve content discovery.
- Content Partnerships: Formed partnerships with content creators and studios to license popular TV shows and movies.
- Continuous Growth: Continues to expand its library of content and invest in original productions, maintaining its position as a dominant force in the entertainment industry.
- Cultural Impact: Netflix’s influence on how we watch and enjoy entertainment is undeniable, shaping modern pop culture and media consumption habits.
2. MOS (Margin of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: Watch
- Score: 78/100
- MOS: 1%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how Netflix (NFLX) makes money:
- Subscription fees: Netflix earns primarily from monthly subscription fees paid by subscribers.
- Subscription plans: Offers various plans with different features and prices to cater to diverse customer needs.
- International expansion: Generates revenue from subscribers globally through expanding its streaming service.
- Original content: Invests in producing exclusive TV shows and movies to attract and retain subscribers.
- Licensing and distribution: Earns money by licensing original content to other platforms for distribution.
- Partnerships: Forms alliances with telecom companies and businesses to promote Netflix subscriptions.
- Merchandise: Sells merchandise related to original content and collaborates with other brands for promotional items.
- DVD rental: While declining, Netflix still earns from its DVD rental service, offering physical discs by mail.
- Ancillary revenue streams: Explores additional revenue avenues like merchandising and events related to popular shows.
- Price adjustments: Occasionally alters subscription prices due to content changes or inflation.
Here are a few of the other companies that Netflix (NFLX) has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- Millarworld
- ABQ Studios
- The Roald Dahl Story Company
- Next Games
- Night School Studio
- Oxymoron Entertainment
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how Netflix (NFLX) stacks up against other companies.
- Amazon (AMZN) – 84/100
- Netflix (NFLX) – 78/100
- Warner Bros Discovery (WBD) – 72/100
- Apple (AAPL) 61/100
- Comcast (CMCSA) – 56/100
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Expanded original content library, creating award-winning shows.
- Pioneered streaming, becoming a top entertainment platform.
- Established as an industry leader, challenging networks.
- Spearheaded global expansion, launching in many countries.
- Formed strategic partnerships with top creators.
- Used data to enhance content creation and user experience.
- Diversified content to appeal to diverse audiences.
- Introduced innovative technologies like interactive storytelling.
- Cultivated a culture of creativity and inclusivity.
- Ted Sarandos’ leadership solidified dominance, driving growth.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of Netflix (NFLX) is 72/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is Netflix (NFLX) stock a good buy?
Some of the top questions investors can have is Netflix (NFLX) stock a good buy or should I buy Netflix (NFLX) stock?
Investing in Netflix can be advantageous for several reasons. As a leading streaming platform, Netflix has a vast and diverse content library, attracting millions of subscribers worldwide. Its focus on producing original content, including award-winning TV shows and movies, sets it apart in the competitive streaming market. Additionally, Netflix’s subscription-based model provides a steady and predictable revenue stream. The company’s international expansion offers significant growth opportunities as it taps into new markets. Furthermore, Netflix’s investment in technology and data-driven approaches enhances user experience and engagement. However, potential drawbacks to consider include competition from other streaming services, rising content costs, and fluctuating subscriber growth. Overall, whether Netflix is a good investment depends on factors such as investment goals, risk tolerance, and evaluation of its future growth potential and competitive position.
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To truly know if Netflix (NFLX) is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
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