Netflix & A Fool’s Errand

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Now, I reckon there ain’t a company ’round these parts that’s fallen from grace quicker than Netflix. Why, just last year, folks were bidin’ up the shares like they was gold dust, climbin’ a good 37% through the first half. But since summer, it’s been a downhill slide, a craterin’ of nearly 27%. Makes a man wonder if Wall Street fellas ever look beyond the next quarterly report.

So, the question on everyone’s lips is this: is now the time to snatch up these discounted shares, or are we lookin’ at a fallin’ knife, best left alone? A body could lose a finger, or worse, a good portion of their savings, tryin’ to catch that one.

Why the Fuss, Anyway?

See, Netflix, bein’ a service business, is mighty vulnerable to the whims of the economy. When folks are tight with their coin, the first thing to go is often the entertainments. Inflation and such, they ripple through everything. Though, I gotta say, the economy’s been showin’ a bit of backbone lately, and folks still seem willin’ to part with a few dollars for a good story.

But the real reason for this kerfuffle ain’t the economy, not directly. No sir. It’s this here contest Netflix is havin’ with Paramount Skydance over the assets of Warner Bros. Discovery. A right proper donnybrook, it is. Seems everyone wants a piece of the pie, and they’re willin’ to tangle over it.

Smart investors, the ones with a bit of sense, are askin’ themselves a few things:

  • How long will these trust-busters take to sort things out, if Netflix and Warner Bros. do come to an agreement?
  • Where’s Netflix gonna get the funds for such a grand purchase?
  • And most importantly, will all this content from Warner Bros. Discovery actually add somethin’ worthwhile to Netflix, or is it just more fluff?

The long and short of it is, acquisitions are a gamble. And Wall Street, bless their hearts, they don’t much care for uncertainty. They’d rather have a sure thing, even if it’s a dull one.

Forget Warner Bros. for a Spell

While everyone’s fixated on this Warner Bros. deal, they’re missin’ the bigger picture. Focus on what you know, not what you think you know. That’s a lesson I learned early in life, and it’s served me well.

The last five years have been a transformation for Netflix, no doubt about it. The stay-at-home days during the pandemic gave ’em a boost, sure, but it’s more than that. Look at the numbers – steadily risin’ revenue, improvin’ profits. They’ve managed to run a tight ship, even after folks started venturein’ out again.

There’s a stickiness to a service like Netflix, you see. Folks get used to havin’ a library of stories at their fingertips, and they tend to stick around. Netflix keeps ’em comin’ back with fresh content, constantly updatin’ the library. Smart move, that.

This here business model – steady revenue, happy subscribers – it’s fueled a surge in earnings. They’ve created a virtuous cycle, a self-reinforcin’ loop. Folks stay, revenue grows, they invest in more content, and the cycle continues. It’s a beautiful thing, when it works.

This loop gives Netflix the flexibility to explore other avenues – advertisin’, immersive entertainment, and, of course, these grand acquisitions like Warner Bros.

A Bargain Below $90?

Now, a forward price-to-earnings multiple of 27 might not seem like a steal at first glance. But consider this: Netflix is tradin’ at a considerable discount compared to some of these less profitable streamlin’ companies and entertainment conglomerates.

In fact, Netflix is hoverin’ near its cheapest level in five years, based on these forward earnin’ estimates. That’s somethin’ to consider, wouldn’t you say?

I reckon the stock will likely continue to be a bit volatile so long as this Warner Bros. deal hangs in the air. But I still think now is a good time to scoop up a few shares of Netflix at a discount. Just remember, invest only what you can afford to lose, and don’t let Wall Street tell you what to think. A little common sense goes a long way, especially in these here times.

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2026-01-29 11:13