✔️ REVIEWS News – Paris/France.
la Netflix-Aktie (WKN: 552484) still has many opportunities for growth. The main thing is that the market is not yet saturated and the pioneer of the Streaming must define new areas. The video games, for example, are on the management agenda.
However, part of the reality is that growth is slowing down. There are now well over 220 million paying subscribers, which of course makes it difficult for any additional paying users. Many know the offer. But there are still ways to monetize illegal account sharing, for example.
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But Netflix's inventory management could also trigger the next phase of growth. Or maybe already did. Let's look at what is becoming more and more essential: margins and profits.
Netflix Stock: Built for Scale
Netflix stock has a base of operation designed for scaling. In the end, on the one hand, there are relatively fixed costs in terms of content and creating your own content. But no matter that the platform of Streaming has 100 million subscribers or more than 200. At least in terms of costs, the differences are rather marginal.
Each additional film and each new series that attracts subscribers can therefore change the business model. Since 2016, we have recognized that this thesis works. The operating margin, still relatively gross, increased from 4,3% to more than 20% during this period. This shows that the new users the platform attracts can have a positive impact on bottom line, or at least business results.
Each new user that Netflix stock management can win over therefore has the potential to monetize the existing ecosystem. Of course, the reader Streaming must continue to invest. The crux of the matter, however, is that the costs are relatively fixed and the economies of scale seem limitless. At least as long as there are potentially new user groups to develop.
However, more investment is needed
Netflix management still needs to invest. Mainly because competitors are entering the market with their own content, some of which is strong. So competition is a feature to keep in mind. Additionally, the top dog is pursuing ambitious plans when it comes to content investment.
But there's still a tentative conclusion that Netflix's sharing business model is designed to evolve. Sooner or later, as margins increase, net profits also increase. This may herald the new phase of growth: one in which there is higher free cash flow and higher net income with moderate sales growth. Maybe we'll have to wait a little longer for that. But it could trigger the next phase of reassessment.
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Vincent owns shares of Netflix. The Motley Fool owns shares of and recommends Netflix.
SOURCE: Reviews News
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