Netflix has a market cap now under $75 billion and still boasts more than 222 million users globally. Could they charge $20 a month for a subscription in the next 5 years? Still don’t know what the market will handle. The company’s current price hike has (along with inflation across the board) caused slow subscriber growth. At the same time, there are many more options for streaming and consumers have to choose or bundle.
If only Netflix could also have a partnership with Disney, Hulu, Amazon, and/or YouTube AND they could create a better UI (user interface). If nothing else a better UI would make for a better UX (user experience) and adding some traditional media things like live sports would be great. All that said, it’s a bargain a this price. People always pay a high price for the only game in town. That’s not the case anymore.
However, the company still generates over $5 billion in net profit on $30 billion a year in revenue. That is done with 46% gross margins, 15% net margin, a 31% return on equity, and the best content selection available. Also, I hate waiting for the next week. Binge watching is still the preferred way to consume content for me. What the market decides if Netflix changes its model at all, only time will tell.
And, at $74.4 billion, Berkshire Hathaway could buy it like it should’ve bought Disney. Long-term, people will still join and watch its streaming service and the prices will continue to rise and the content library will continue to grow and get more valuable. Buffett should bag this elephant.