5. Netflix Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 144
During a long segment, Jim Cramer dove deep into the streaming giant Netflix Inc. (NASDAQ:NFLX), particularly its earnings report at the time. Cramer thought the company put out exceptional numbers but the market got spooked by the announced changes of how the company would be reporting its numbers moving forward. Despite the sell-off, Cramer’s opinion was that the market was overreacting and that Netflix Inc. (NASDAQ:NFLX) would remain a profitable growth story since. Here’s his analysis:
“We got to talk about the market surprisingly negative reaction to the Netflix quarter where the stock tumbled 9% last Friday. To me the quarter looked pretty darn good, yet the stock’s in full-blown correction mode here. […]
Netflix’s paid account sharing offering seems to be converting former password shares and paid users, their advertising tier keeps improving, and they keep putting out great content that resonates all over the world. […]
The thing that really spooked shareholders was the fact that starting next year-so important I got to get this right-Netflix plans to stop providing quarterly numbers for membership or average revenue per member, that’s what we used to live on, that was our oxygen. […]
I’m more inclined to side with the bulls than with the bears on Netflix because last Thursday night we had saw a company that simply doing much better than expected at its core business of selling subscriptions and quickly building a strong supplemental business of selling advertising. I bet the ad business keeps building and quarter after quarter and year after year which is a good thing; not a reason to go bearish. Most importantly, I see a business that’s becoming much more profitable than anyone could have imagined. […]
Netflix may have sold off hard because they’ll stop providing quarterly subscriber numbers starting next year, which does feel ominous. Actually, I’m not worried because this company has pivoted from a pure growth story to a profitable growth story, and going forward, profitability is what you should be watching. That’s why I’m siding with the bulls here and sticking with Netflix, especially now it’s gotten substantially cheaper.”
Indeed, Jim Cramer’s call on Netflix Inc. (NASDAQ:NFLX) at the time was spot on, with the company’s share price rising by 81.67% since those comments.
Jim Cramer talked about the company before its most recent earnings report:
“Finally, after the close, Netflix reports. Now, we’re lucky to have Friday off for Good Friday because studying the hydra-headed Netflix call requires a huge amount of time. I always leave a lot of time for it. See, each time it reports, management talks about the rollout of its ad-supported subscription tiers, and the darn ad business is incredibly lucrative. It is what still draws me to the stock. There was a time when the Netflix quarterly conference call was the most exciting thing that happens to us in this business. But the bottom line, that was before the election. These days nothing coming out of Netflix can possibly keep up with the endless drama from the White House.”
