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Great piece by Tara Lachapelle at Bloomberg on Netflix vs. Disney. Netflix market value has now surpassed Disney’s market value. Yup, as Lachapelle puts it,
An 11-year-old app that charges $11 a month is worth more to investors than the legacy conglomerates that earn billions more from TV advertising, box-office hits and cable and internet packages.
The Bloomberg article goes on to point out the conundrum in today’s market. This is a broader trend that isn’t just limited to Netflix. You see it with Amazon and its competitors. Firms that try to engage in the profit sucking, market-share stealing tactics of Amazon and Netflix see their share prices tumble while Netflix and Amazon make similar moves and their share prices soar.
The market has punished companies like Disney and Comcast for pursuing expensive growth opportunities and rewarded Netflix for doing the same. It may someday achieve the financial success its shareholders imagine. For now, though, Netflix brings in a fraction of the revenue Disney and Comcast do, carries more debt relative to Ebitda and burns through nearly $2 billion of cash every 12 months. Disney and Comcast’s operations can generate that much cash in about a month.
You can read the entire piece here.
Jeremy Jones, CFA
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