This is a stock that I DO have some shares in another account. That gives me a little more familiarity with the issue and it may give me a bias towards it but it showed up in the numbers today and deserves consideration.
According to money.cnn.com, Netflix "...provides an online entertainment subscription service providing subscribers access to a library of filmed entertainment titles formatted on DVD." What this amounts to is a DVD subscription service, where, as I understand it (I do not use the service), for a monthly fee you can rent unlimited #'s of DVD's (sequentially not all at once lol).
Anyhow, NFLX is indeed having a nice day trading at $32.66 up $2.87 or 9.63% as I write.
On July 17, 2003, NFLX reported their second quarter results which, as I see it, were nothing short of stellar: Revenue was $63.2 million, up 74% from the same quarter last year which was $36.4 million, and up 14% from the $55.7 million for the PRIOR 3 months. They reported 1.15 million subscribers, adding 327,000 new subscribers during the quarter, a 39% increase in subscribers added, but on a negative note a decrease in 22% from the 417,000 new subscribers added in the first quarter of 2003.
Morningstar shows the exponential growth in revenues reported by this company at $1 million in 1998, $5 million in 1999, $36 million in 2000, $76 million in 2001, $153 million in 2002 and extrapolating the current quarter would get us north of $240 million in 2003.
Free Cash Flow, which in my humble opinion, is a good measure of viability of a rapidly expanding business (remember all of those dot-com's which 'burned' up all of their cash?)...has improved nicely from a $(29) million in 2000 to a positive $2 million in 2001, $37 million in 2002 and $57 million in the trailing twelve months.
This company is LOADED with cash (relatively speaking!) with $116.3 million in CASH reported on Morningstar.com with $51.5 million in current liabilities and only $500,000 reported in long-term liabilities. In addition, NFLX report $3.3 million of other current assets on Morningstar.
If you go to Yahoo.com and check under finance and detailed stock quotes you can pull up the 'profile' on Netflix where I have obtained the following information: Market cap is a moderate $715.1 million with 24.0 million shares outstanding and 10.8 million shares that float. No dividend is reported. Since NFLX just turned profitable, no p/e is recordable, the price/sales ratio is a moderately pricey 3.55, and as of 7/8/03, there were 8.99 million shares out short representing 83.3% of the float (!!!). This gives us a short ratio of 6.96 days based on average trading volume of 1.29 million shares.
Overall, I like this stock a lot. The growth is there although there is a SLIGHT decelleration of quarter to quarter subscriber growth, the numbers are still strong. The company has lots of cash and is throwing off more $millions in free cash flow. The p/e, p/sales is a bit expensive but with all of the other things in line, this shouldn't be a problem. Recently, there was a court decision upholding Netflix's methods (? patents) on delivery of DVD's...so there is what we call a nice 'moat' forming. I have borrowed that from Morningstar.com which puts out a nice newsletter and likes to talk of moats around companies....sounds medieval absolutely.
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Posted by bobsadviceforstocks at 1:53 PM CDT | Post Comment | Permalink