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NFLX next stop: $1000 or $100?

July 19, 2023

As Netflix (NFLX) gears up to release its earnings report tonight, LikeFolio members are already equipped with the LikeFolio Earnings Score and a recommended 5-day trade.

However, this event should not be overlooked by long-term investors.

Tonight’s company conference call could be a pivotal moment for Netflix, potentially shaping the future trajectory of the streaming giant for years to come.

Historically, companies at inflection points have either soared to new heights or faltered.

Apple Inc., for instance, successfully navigated its inflection point with the introduction of the iPhone, revolutionizing not only its own future but also the entire mobile industry.

Conversely, Blockbuster, once a titan in the video rental industry, failed to adapt to the rise of digital streaming services at its inflection point and eventually sank.

Netflix, much like these historical examples, is at a crucial juncture.

The company's future hinges on how it navigates the following opportunities and challenges:

Opportunities:

  1. Monetization Strategy: Netflix's shift from subscriber additions to boosting its monetization could potentially increase revenue per user and overall profitability.
  2. Password Sharing Crackdown: Netflix's new policy requiring users to pay an additional $7.99 per month to share accounts outside their households has shown promising early results.
  3. Ad-Supported Plan: Netflix's ad-supported plan could play a bigger role in the company's overall business, with the average revenue per membership for this plan already exceeding its standard plan.

Challenges:

  1. Slowing Growth: Netflix's revenue growth has slowed down, with year-over-year growth of roughly 4% in Q2 2023.
  2. Increasing Competition: The streaming wars are intensifying, with competitors like Hulu, Amazon Prime Video, HBO Max, Apple TV+, and Peacock offering compelling alternatives.
  3. Dependence on Licensed Content: Netflix's dependence on licensed content is a competitive risk, as seven of the 10 most in-demand shows available on Netflix in the first quarter of 2023 were licensed.
  4. Macroeconomic Concerns: Broader macroeconomic concerns could also weigh on Netflix. As a company dependent on growing consumer spending, any downturn in the economy could negatively impact Netflix's growth.

The stakes are high, and the urgency is real.

The next 18 months could be a crucial turning point for Netflix and its long term investors.

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