In this video I am going to look at the recent stock crash of Netflix (NFLX), and whether this growth stock is finished, or if there is still reason to be optimistic.

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Main Negative News / Reasons for Drop

- Drop of subscribers for the first time for over 10 years. They dropped 200,000 subscribers for Q1. Analysts were still expecting slowing, but positive growth numbers.
- Suspension of service in Russia had an impact of 700,000 paid memberships winding down.
- EMEA region saw higher churn levels of the eastern European countries close to Ukraine.
- Guiding to lose 2M subs in Q2.
- Revenue Growth slowing to 9.8% versus 24% in the previous period one year ago.
- Covid tailwinds are now gone.
- One time impact from the company’s exit from Russia.
- Increased competition from Apple and Disney, amongst others.
- On the back of the news, Bill Ackman from Pershing Square Capital Management sold out of his full stake losing $400 million. He only investing in the stock in January.


Stock Price

- Stock dropped 35% after the news.
- It ended the week trading at $215.52 (lowest level since January 2018), which was down 38% since the earnings call.
- It had hit a high of $691.69 back on November 17th and has dropped 69% since then!

Management Team

Netflix has a strong management team who has been with the company for many years.

Reed Hastings – Co-CEO –Founder – We like founder led companies.
Ted Sarandos – Co-CEO and Chief Content Officer – Been with the company since 2000.
Spence Neumann – CFO – Previously was CFO at Activision Blizzard and worked at Disney.
Greg Peters – COO and Chief Product Officer – Joined Netflix in 2008.

The management is key in guiding the company to future success.

Reed Hastings has a 92% approval rating on Glass Door.

Is there anything positive?

- CFO Spencer Neumann recently said the company’s TAM (Total Addressable Market) in 700 million to one billion, this excluded China. So there is still some room to grow outside of their domestic market which has much higher penetration.
- They will pull back on the spending growth on content and non-content to try and maintain their operating margin over the next couple of years. This is to reflect the realities of the revenue.
- Free Cash Flow is still positive increasing from $692M to $802M year-over-year, and they expect to remain cash flow positive until the end of the year.
- If the management team can monetize the password sharing or by adding a different tier with adds at a lower cost this could make a massive difference. I believe they can do this because their product is strong.
- They are talking about having different membership tiers with the lowest one having adverts in it, this is something there are looking at over the next year to two.
- Engagement in the product is still really strong.
- They have also undergone the transition from purely licensing content from other companies to creating their own content, something they needed to do in order to bring their destiny into their own hands and have that intellectual property. Remember companies like Disney have a 90 year advantage of creating their content.
- Gaming coming in is allowing them to tie the games and series or movies together.
- Netflix has brought globally notoriety to local content producers.

Top Netflix Originals

- Squid game
- House of Cards
- Bridgerton
- Stranger things
- Narcos
- The Crown


Enjoy the video!


Useful Links from the Video

Netflix Q1 2022 – Earnings Call

   • Netflix Q1 2022 Earnings Interview  

Netflix Investor Relations

https://ir.netflix.net/ir-overview/pr...


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Disclaimer: Dan Powell is not a financial advisor. All content is for education and entertainment only. Always seek assistance from a qualified professional before making any investment decisions.

0:00 – Intro
0:30 – Netflix Letter to Shareholders for Q1 2022
4:02 – Bill Ackman of Pershing Square Sells Out of Netflix (NFLX)
5:28 – Netflix (NFLX) Stock Price Decline
6:15 – Netflix (NFLX) Management Team Profiles
7:37 – Netflix (NFLX) Shared Subscribers
9:02 – Average Revenue per Member (ARM)
10:02 – Netflix (NFLX) Free Cash Flow
10:17 – Netflix (NFLX) Total Addressable Market (TAM)
11:01 – Content is King
11:44 – Netflix (NFLX) Gaming
12:09 - Netflix (NFLX) Management Team Track Record
13:05 – Verdict on Netflix (NFLX) Stock
14:41 – Outro