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Netflix had results out last Thursday, which were better than expected. The stock jumped by 8.5% on Friday.
They added 7.66 million paid subscribers during the fourth quarter, more than the 4.57 million Wall Street expected. They now have 231 million customers, which is 1 out of every 35 people on the planet. Revenues were in line with expectations, and included a contribution from the ad-supported tier for the first time.
The other big news was a management shake-up, with founder Reed Hastings (pictured below, now 62 years old) shifting to the role of board chair, with two co-CEOs below him, and a new head of content, Bela Bajaria.
Netflix is a voracious buyer of TV shows and movies. Their content budget is currently $17 billion per year. You can read a long feature article about all that in the New Yorker: Recognising that people like having more. If you can't find anything to watch on Netflix, you are the problem.
Netflix was founded in California in 1997 and they sent out DVDs in the mail. In 2007 they started streaming content. They made original programming from 2010 onwards. Ted Sarandos lead that effort, and he's now one of the co-CEOs.
The last two years have been a tricky time for the company, with a surge in signups (and the share price) during the Covid period, when everyone was stuck at home with nothing to do. Netflix shares hit an all-time high of $700.99 in November 2021, then plunged to $162.71 in a matter of months, in May 2022, when normal life resumed. Now the shares have recovered smartly, back to $342.50, but they are still well off those prior highs.
The management team is laser-focused on profitability and expects $3 billion in free cash flow this year. In the earnings call, Hastings even intimated that they may start paying dividends. Imagine that! For now, they trade on a historic price-to-earnings ratio of about 30. I like the future of this company.
