FANG Exposed - Part 5

So far I have said why Facebook and Alphabet are great investments and why I would not invest in Amazon. Now here is my stance on Netflix.

Company	Facebook	Alphabet	Amazon	Netflix
Ticker Symbol	FB	GOOGL	AMZN	NFLX
	A	B	C	D
Earnings Per Share	6.8143	37.2373	6.3429	2.3755
Price to Earnings Ratio	30.95	32.52	284.1	152.67
PE/Growth	1.34	1.89	13.15	2.78
Institutional Ownership	71%	78%	56%	77%
Gross Profit Margin	86.04%	57.41%	37.77.%	38.13.%
Long-Term Debt to Equity	0	2.46	120.59	185.52
Return on Assets	25.54%	13.39%	3.04%	5.46%
Return on Equity	28.79%	16.84%	11.86%	28.09%

Everyone loves Netflix! Netflix raised their price a few years ago and they lost membership. They recently increased their membership price and the market did not flinch. Netflix is available on almost every smart device to watch old television shows and new and old movies. Netflix has spent a ton of money on new content and it has helped grow and maintain membership.

All of that sounds good so why wouldn't I be a long term investor of Netflix?

• Price to earnings ratio is too high. To bring the PE Ratio down to 30 means it is trading 5 times higher than it should which would make it's price around $70/share. At that price I would be a buyer.
• Debt to equity is so high as Netflix creates their content by paying from debt issuance. So many other companies have content but don't have the platform. Hopefully it works out for Netflix, but this point brings me to the next.
• Companies with tons of content are looking to create a platform to compete and take market share from Netflix. Disney, AT&T, and everyone else is looking to take Netflix down. The leader to watch for is Disney as they have a ton of content, acquired more with the Fox acquisition and acquired a strong platform in Hulu that came with Fox.

Cord cutting has grown lead by Netflix and their content is top notch. The membership fee for Netflix is reasonable although it is higher than Amazon Prime, but Amazon is separating their services to charge the user more money. The biggest headwind to Netflix is competition, but their biggest advantage is their unlimited world wide growth potential. 

Netflix is great to buy on dips and sell on highs, but I would not be a long term investor of Netflix. A small dip of subscribers could cut the stock price of Netflix in half.