Netflix and its explosive growth. NFLX SPY QQQ Streaming Market-Crash Proof

Hey everyone, this is Dan with my analysis on Netflix, stock symbol NFL. Netflix has gone through some explosive growth in the last 3 to four years. The stock price has gone up a lot. I've been buying and selling Netflix shares in the last few months and have made a lot of profit. In the next few minutes, I will tell you why I bought more Netflix shares yesterday and why I believe Netflix will continue to grow impressively. This is the daily chart for Netflix for the last year. As you can see, it has gone up about 88% compared to SPY representing the movement of S&P 500 which went up only 11%. Triple Q representing the price movement of NASDAQ 100 also went up just 11%. Netflix clearly outperformed the broad market in the last 12 months. If you look at the chart for the last 3 months, we can see that Netflix went up about 48% when TripleQ went up 32% and SPY went up 24%. Again, Netflix outperformed the broad market in the last 3 months. If you like what you have seen so far, I encourage you to click the like, subscribe, and notification button so that you'll be notified when I publish updates on Netflix or when I publish another video. Thank you. Let's continue. We have a lot of interesting stuff to cover. What does the company do? You probably know already Netflix, they provide entertainment services. They offer television series, documentaries, and feature films and movies. They purchase these contents from other movie producers, but they also recently started to make their own movies and TV series. Actually, they've won quite a few prestigious awards in the last 2, three years. Let's look at some of the key financial data. The market cap is $542 billion. Definitely a very sizable company. Netflix is actually one of the five companies called the Fantastic Five. if you probably heard about it or the FAB five. I will talk more about them later. The P ratio is at 60. Pretty high and the PEG ratio is 2.51. Definitely high. Usually we prefer PEG ratio no more than one, but I will explain a little more about that. Actually, the PEG ratio, if you look at it closer, it's actually closer to one. Based on Finn Viz, the P is 62 and the PEG ratio is 2.51. And they use the EPS growth of 25% to calculate the PEG ratio which is the P ratio divided by EPS growth and also divided by 100. And that's how they arrived at the 2.51 figure based on 62.52 and 25%. But if you look at the EPS yearbyear for Netflix and look at the EPS growth every year, especially last year it was 65%. Then you can see that the average EPS growth for the last 3 years was 25%. And that's where Finn Viz got the 25%. Now if you look at the chart of the EPS in the last 20 years from '05 to 2024, the 25% EPS growth will correspond to a straight line like this. As you can see with a straight line like this, it doesn't really describe the much faster growth in the last couple of years. The last year's EPS growth is 65% which looks like this. And if you look at the PEG ratio based on the 65% EPS growth, then the PEG ratio will be 0.96, which is less than one. And that's a very favorable PEG ratio. Later on I will talk about information supporting the argument that Netflix can actually grow at 65% rate or maybe at least 40 to 50% EPS rate of growth for the next I would say 2 to 3 years easily. And by the way they will announce their second quarter earnings on July 18th after market close and we'll know more about the progress that Netflix has been making recently. Let's look at analyst ratings. This is based on Yahoo Finance. Out of the 48 professional analysts tracked by Yahoo, about twothirds of them recommend a strong buy or buy for Netflix, which is very positive. And the rest of them recommended hold. Only maybe just one person uh recommended sell. That means it's very bullish overall for Netflix. The average price target is 1175 and the current price is 1275. The max is 1,600 which is quite a bit above the current price. And if you look at the recent changes in analyst ratings, there's a lot of reiterated since May of this year, especially from Bank of America, which rated them as a buy at the target price of 1490, which is above the 1275 current price. And Openheimer also outperform rating, which is a very bullish rating. and the price target of 1425 also above the current price. But on June 7th, which is a couple days ago, Seapport Research Partners downgraded Netflix from buy to neutral and that's a bit of a bearish sign. Now, as long as this downgrade is not followed by other analysts, then we should be safe. So we definitely need to monitor the ratings very diligently in the next few days to see if they get another hit or more hits by analysts. The rating from Louis Navalier is overall a grade A rating which is very positive by Louis Neier and the fundamental grade is B. It's based on net income, EPS, EPS growth, debt and asset ratio and so on and so forth. All the fundamental data quantitative gray which is based on the chart movement is an A. That means the chart looks very bullish and we saw indeed solid charts for the entire year and also for the last 3 months. Those charts look very bullish for Netflix. They have embarked upon quite a few important strategic initiatives. First of all they expect to spend about $18 billion on content in 2025 up from 17 billion last year. And that's a big budget compared to even some of the major movie studios like Disney and Universal and so on. Netflix has developed itself into one of the top movie and TV production studios in the world and they started to air commercials in 2024 and that segment of their business has been growing rapidly. The projection for ad sales will be $5 billion of 2025 and they project ad sales will reach $8 billion of 2027. So the ad revenue will become a very important chunk of their revenue in the future. Netflix early move into interactive show and live programming is also very strong. There's this worldwide wrestling live streaming. The first month on the surface reached the global top 10 which is definitely a very impressive performance. So they will have a lot more growth in the live streaming business. Management also mentioned that they will experiment in cloud gaming and realtime tournaments. So that's another source of revenue. Netflix overall just a very very innovative company. more strategic initiatives especially related to artificial intelligence for example they identify what issues likes to view and make recommendations accordingly that's why Netflix is very addictive which is great business for Netflix decide what content to create based on viewership by region by market and they've been producing movies and TVs not just in the US but also in different parts of the world like Spain Germany, England, France, and Taiwan, Japan, and so on and so forth. In Korea, they make a lot of uh TV series in Korea. Very good quality TV series. They have automated subtitles, dubbing and translations for their international contents. And I've been watching a lot of movies and TVs, Netflix bought up made from overseas. And the quality of the dubbing overall is very good. I'm very impressed. They've been running through AB tests using AI to determine which thumbnails, trailers, or tagline to use for each specific viewer. They enhance the search bar with natural language processing. So, you can say, "Show me funny sci-fi movies with robots." It'll then recommend a bunch of movies for you under that description. Netflix also uses AI to predict when the users might churn or disengage Netflix and stop the subscription. So they proactively recommend content or send notifications to keep the viewers engaged. So these are the AI initiatives. With all these important strategic initiatives, I believe there's a good probability that Netflix will continue to grow impressively at 40 to 60% EPS growth rate in the next 2 3 years. In other words, see this impressive growth in the last 2 three years. I think that that's most likely going to be sustained. Let's look at insider trading activities. Each red bar is a insider sale of the Netflix stock. As you can see, there's quite a bunch of sales recently in the last month or so. If you look at the stock price when we had a bunch of sales here and then the market dropped and coincidentally in 2022, that's when the Fed started to hike interest rates. And then there's a bunch of sales here. So, we had a little drop here. And with this recent sales, quite a bit of sales, we see the stock price also flattening. So that's a little bit alarming, a little bit of a bearish sign. And if you look at specifically who's been selling, who the insiders are selling stocks, very noticeable is the chief financial officer, Mr. Spencer Newman, who sold 2,601 shares worth $3.4 $4 million, which is about a quarter of his total holding before he sold. That's definitely alarming. And I looked up this person a little bit. He's been the CFO of Netflix since January of 2019. He's still the CFO and he's not quitting anytime soon, as far as I know. So, that's a bit of a positive sign. But, he did cash out to the tune of $3.4 million. So, maybe he bought a yacht or something. Good for him. But it's alarming definitely for the investors. We should keep an eye on any future insider selling activities. Let's look at how much the company is worth. For comparison purposes, I'm listing the P ratio and the PEG ratio for the Fantastic 5. And they are Amazon, Microsoft, Google, Netflix, and Apple. As you can see, the P ratio Netflix at 60 is on the high side. Definitely the highest PE ratio among the five companies. The overall average is 37. The PEG ratio Netflix currently has 2.51 which is not the highest one. Actually the highest one is Apple at 4.27. The group average is 2.6. If you look at the current P ratio of 60.26 and the EPS growth of 65% uh actually that's EPS growth of last year. So if you use the APS growth number, you'll arrive at a PEG ratio of 0.93, which is not bad. So for the next two or three years, I assume a P ratio of six of 50, which is less than the current ratio of 60. So I'm a little bit more conservative and I assume the EPS growth of just 45% which is less aggressive than last year 65% and I believe the 45% EPS growth is achievable considering the strategic initi initiatives they've been working on and with those two numbers uh we are looking at a PEG ratio of just 1.1 which is not excessively high and then based on these assumptions and the current net income and the number of shares and stock price. We can calculate the theoretical net income for 2025 at 12.6 billion and the stock price as 1445 at the end of 2025. For 2026, 2095 and so on and so forth. In other words, within about a year from now at a price of 1445, we can look at the price with a gain of more than 10% from today's price. So that makes Netflix a good investment choice from that perspective. Let's see whether Netflix is resistant to stock market crashes. I'm very concerned about potential stock market crashes. I used five periods of time to do the analysis. First the financial crisis that happened at the end of 2007 2015 market crash the Fred rate hikes in 2022 2023 market correction that happened in the last quarter of 2023 and then the famous pandemic crash. You can see spy for example during the financial crisis went down 52%. Whereas triple Q went down 47%. pretty significant. However, Netflix went up 71%. During the financial crisis, it's pretty impressive. And then during the pandemic crash, spy went down 23%, TripleQ went down 17% and Netflix went down only 4%. So basically overall, if you average the numbers from these five crashes, I get a average market drop effect. Spy is negative 23% QQQ 21 negative 21% Netflix is positive 10%. That definitely Netflix has been more crash resistant than SPY or Triple Q. And if you look at the stock performance since 2023, Netflix is up 332%, Triple Q 105% and SPY 63%. Definitely have Netflix also outperformed the broad market overall since 2023. Let's look at a chart in more detail. This is a three-month chart and you can see there was a rather noticeable drop 4 days ago and since then the stock price has been pretty flat and the stock price is approaching this blue line which is the middle of the bowlinger band or the 20-day moving average. If you look back the last couple of months, whenever the stock price started to approach this line, the 20-day moving average, it started to rebound. That's why I believe it's very likely that within the next 2 three days, the stock price will start to rebound. And if you look at the RSI indicator, that's a relative strength indicator. It's at 56. That means it's not excessively high. That means the stock is not overboard. And then that that's a good background condition for a possible rebound in the next two three days. Not surprisingly, DMI, MACD, and MACD are showing declines for the stock price. I'm again anticipating a rebound pretty soon based on a strong fundamentals and based on the technical chart. Let's sum it up. Netflix has demonstrated a history of fast growing EPS and their sales expansion plan and AI strategies seem to be robust enough to support high EPS growth rate. The evaluation calculations and better investing SSG chart show upward potential for stock price. It is more resistant to market crashes than SPY or triple Q. The price chart show recent dip in stock price, but there's a high probability of a rebound at a 20-day moving average in the next two three days. The professional analysts mostly recommend buy or strong buy. The July 7th downgrade to neutral by Seport Research Partner is worthy of attention, but would not be too damaging if it's not followed by other analysts. Insider selling activities seem to be high in the last couple months, especially the selling of shares by the CFO is alarming. We need to continue to monitor insider selling activities. So, what are my strategies? First of all, I bought and sold Netflix shares in the last few months and make some profit. And I'll show you exactly what I did in a minute. Most recently, I bought some more shares on July 8th, and I'll buy more shares if the price rebounds around the middle of the Ballinger band, like what we've seen in the chart a moment ago. I might sell some shares if the stock price stays below the middle of the Ballinger bands. In the next few days, I will notify my subscribers about my analysis and my trades of Netflix in the next few months by way of my YouTube account in the community section. or the posting section. For example, three months ago, I posted that I added more stocks to my analysis as shown in my March 29th video, what to buy when market crashes. I analyzed 38 stocks or ETF and I found that the most crash resistant ETF for stocks are a media, Netflix, Tesla, Eli Liy, etc. Actually the ranking is not just based on crash resistance but also performance since 2023. Apparently Nvidia ranked as a top selection because it went up tremendously. But as far as crash resistance actually Netflix is even better than Nvidia and subsequently I bought Netflix shares. 10 days ago, I posted that I sold on Friday, June 27th during aftermarket the TleQ shares I bought earlier and specifically I sold the Netflix shares I bought on May 23rd at 11% gain. And then two days ago, I tweeted that I bought more Netflix. I'm still holding shares bought on March 31st and May 16. For those shares, I'm seeing a paper gain of more than 24%. If you like what you've seen so far, I'd like to encourage you again, click the like, subscribe, and notification button. As usual, I welcome your comment, questions, and suggestions. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you want to buy or sell stocks, you should make your own decisions, and you should definitely consult with your financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments. [Music]