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Netflix shares - a good buy?
After my wife signed us on to Netflix I have been doing some research - thinking of buying some shares. It has experienced phenomenal growth since 1999 but has p/e ratio of 45 at $26. Someone mentioned to me recently that Netflix is putting video stores out of business.
Anyone think Netflix is a good buy? What would slow it down?
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I think online services (video on demand) will eventually put Netflix out of business (if Netflix cannot succesfully adapt to that market).
Rumors are Apple will be releasing a plasma TV that can potentially run an operating system. Why wait for movies to come in the mail & go to the post box to send them back when you can get them at the click of a remote. |
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Quote:
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Unless Video on Demand can come up with 35,000 choices on any given day, I'm not sure they are in the same market. The beauty of Netflix is in the variety. They offer almost any kind of DVD out there with the exception of porn. They obviously have old and new movies, but they also offer How-to video's, Seasons of TV shows, concerts, childrens videos of every kind, discovery channel shows, the car repair and bike building shows, etc. They offer a very cool product at a reasonable price. Seems Blockbuster online is there only major competition.
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Home entertainment will change alot in the next 5 years. Netflix still has plenty of growth to look forward to before then.
I'm not sure its a particularly good buy right now- the stock shot up dramatically a week ago after earnings came in. The problem is that revenue per customer keeps declining while cost to aquire each new customer keeps rising. I don't see any reason why video on demand could not offer 35,000+ choices. |
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Where is that wrench?
Join Date: Jun 2003
Location: Irvine, CA
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Tivo is planning to do video on demand as well. I currently have a Tivo box with a wireless network connection because I would have had to run a phone line from the opposite side of the room. So all that needs to happen is for Tivo to update the software on my Tivo unit, and I have video on demand on my TV (this isn't happening any time soon though). Cable companies are also doing the same thing with digital cable. So you don't have to have a high speed internet connection to get video on demand. Netflix is also plowing cash into developing their own video on demand offering.
So who will be the winner in the future? Long term I think the cable companies have everyone beat because eventually everyone will move to digital cable to get HDTV. The cable companies current model for digital cable is make the base service expensive, but add-ons are cheap. So they have a little easier time pricing out Tivo and Netflix on the added services because they make lots of profit on the base service. Short term I think there may be some growth left in Netflix because they have a few years before video on demand gets to be real significant. And if you own any stock in blockbuster video sell it now because they don't realize they are a dodo. And I don't think video on demand will have much problem serving up tens of thousands of titles. Disk space is real cheap, and getting much cheaper quickly. |
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