Market Overview

Netflix Strikes Balance Between Content And Spending, But Stock Trading Like A Takeover Target

Share:
Netflix Strikes Balance Between Content And Spending, But Stock Trading Like A Takeover Target
Related NFLX
Barron's Picks And Pans: Alaska Air, AT&T, Netflix, Pepsi, And More
A Chat With CNBC's Ever-Active Polymath Michelle Caruso-Cabrera
I'm Not Selling Technology Names Because Of Tax Reform (Seeking Alpha)

There's much to love and hate about Netflix, Inc. (NASDAQ: NFLX) heading into the company's second-quarter earnings report on Monday.

On the one hand, Netflix is the recipient of many Emmy nominations which reaffirms the quality of its content. On the other hand, the company continues to burn cash and is expected to do so for some time.

Perhaps Netflix struck the right balance between investing in its content and eliminating waste, Recode's Ed Lee highlighted as a guest on CNBC's "Squawk Box."

Netflix's image as a reckless cash spender no longer applies as the company has become "smart" in how it spends money, Lee suggested. For instance, it's only financing original content that will remain relevant for years to come and will continue attracting new members to the platform, especially in the international market where it has substantial more growth as opposed to the saturated domestic market.

"If you have never watched 'Orange is the New Black,' you can watch it next year or the year after," he explained. "It will still be fresh to you. I think it is a good thing to do."

But at the same time investors need to keep in mind that Netflix's stock is "trading like a takeover target" at 100 times forward earnings, Lee added. However, there's always the possibility it will be acquired given its status as a major distribution player with access to 50 million domestic users.

Related Links:

Has All The Negative Sentiment Over Cord-Cutting Turned Entertainment Stocks Into A Bear Trap?

Can Netflix's Q2 Earnings Propel The Stock To Record Territory?

Image credit: Matthew Keys, Flickr

Posted-In: Ed Lee Netflix Original Content streaming videoCNBC Tech Media Best of Benzinga

 

Related Articles (NFLX)

View Comments and Join the Discussion!