Why I Don't Care About Netflix Beating Earnings

     Netflix (NFLX) crushed earning after falling flat on their face in their quarter two earnings call. But I'm not buying in on Netflix being a solid long-term investment just yet. They have a lot of fundamental issues that makes me want to avoid them at all cost.



     For one, do they have no concept of income to debt ratio? They have a massive amount of debt that does not coincide with their income. They have about 500 million in net income with about 15 billion dollars in debt. The debt has outpaced almost every measurable category on the income and balance sheet.

Look at the changes in these major categories over the last three years.
Debt- 197%
Net income- 109%
Cash and Equivalents- 153%

     

They have no short-term investments... Compared to the 500 million they had invested three years ago. Even with their 160% growth in assets, over 50% of their assets are intangible. Which brings me to my second point. What happens when real competition comes into their space? For 11 years they have owned 75%+ of all video streaming market share and they have rightfully dominated that space. Sure there have been a few small players such as Hulu, Amazon Prime etc. but what happens when other massive tech companies want to get in on the movie streaming service?

Disney(DIS) already announced they are pulling all of their content from third-party streamers and starting their own streaming service, and who owns more original content than Disney?

Apple(AAPL) is launching their own FREE streaming service and will be creating original content as well.

Facebook (FB) already launched the Facebook watch, where you can watch top videos from your favorite pages. They already started streaming live events such as sporting events.

Google obviously already has Youtube, who is able to offer free movies and generate revenue from advertisements

Netflix will not be able to hold 75% market share forever, it's simply not possible. Apple, the largest company in the world by market cap has less than 19% of the worlds smartphone sales. So what happens to Netflix' biggest asset when they have to share it? Licensing, trademarks, copywriters etc. will all have to share with the biggest companies in the world- quite frankly, Apple, FaceBook, Amazon, Google, and Amazon are the last companies I would ever want to compete with. 




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