NetFlix (NFLX) is last year’s business model. Send DVDs through the mail. It is better than having expensive stores like Blockbuster (BBI) does. But, having an online VOD system like the Amazon Unbox is even better. Low cost. No inventory problems. State of the art. And, most important, it is where the studios and networks are heading. Sell it online.
A look at the shares of Blockbuster, NetFlix, and Amazon (AMZN) is telling. Over the last year, Blockbuster and NetFlix are down 20%. Amazon is up well over 100%.
NetFlix is really not much of a business. it has earnings of $9.9 million last quarter on revenue of $305 million. Not much of a net margin. Sequential revenue growth from the immediately previous quarter was only 10%. And. gross margins were only 36%. The company has 6.8 million subscribers, up only 8% from the immediately previous quarter.
NetFlix has $400 million in cash and a market cap of $1.5 billion. With the cash taken out, the company trades for less than one times revenues.
Not much of a business.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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