Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Plotting the next leg for Netflix
Few companies have dominated the popular zeitgeist like pay television streaming service Netflix. Similarly, few companies have been such a lightning for what is both good and bad about so-called growth stocks. According to market analysis, Netflix was the top performing stock in the S&P500 for the entirety of the 2010’s, delivering a return of 3,693 per cent to investors; that is a 36 bagger.
The company had humble beginnings, with those old enough to remember the red envelopes through which DVD rentals were both received and returned. The company even had its own copycat in Australia. Yet as is the case with most of the worlds largest and most successful companies, the story is never linear or smooth.
In the case of Netflix, many expected the approach to fail, with founder and CEO Reed Hastings initially seeking to leverage the success of Amazon in a single product sector. If they decided to ship VHS tapes, the company may well not exist today.
The company was founded in 1997, in California as usual, and took a full decade before they decided to pivot the streaming business they are today. By 2009, records show Netflix streams overtook their DVD shipments and in 2011 the company became the largest source of internet streaming traffic in America, accounting for some 30 per cent of all peak traffic.
As with every tech business, analysts and external experts have questioned the business model at every stage. Initially, they were not confident in people wanted to rent DVDs, then they lack barriers to entry in streaming, next it was whether a streaming service could actually deliver on their decision to invest in their own original content.
The group has bucked the trend in every regard, but particularly when it comes to content and as the story of Disney+ has shown, it is those companies that control the content, that control the market. As it stands today, original production has reached 40 per cent of everything on Netflix with 2020 set to see the company invest US17 billion alone in 2021.
What began with the award winning House of Cards in 2013, reached a new peak in 2021 with the studio winning 44 Emmy Awards and the popular Squid Game series reportedly seeing 142 million accounts watching the series.
Netflix’s subscriber numbers are among the most watched statistics in every quarterly earnings season, with the company outperforming in September, adding another 4.6 million subscribers in three months to take the total to 213 million, or close to ten times the population of Australia. The company remains US centric, with 74 million being local residents, but the rollout continues to gain traction as the investment in original content is made at a local level. By comparison, the highly touted Disney+ has just reached 116 million.
Despite the negativity towards the lack of profitability of growth companies, the company reported a US$1.4 billion profit with revenue jumping to US$7.84 billion in 2021. Whilst the growth has benefitted from global lockdowns and people being forced to stay home, a massive slate of original content releases over the Christmas period may offer an unexpected kicker.
The company is by no means standing still, with management announcing the rollout of a series of online gaming, not gambling services, as they seek to take eyeballs away from the likes of Tik Tok, Facebook and Instagram. And here is the real kicker, all of this has been achieved without taking on advertising within their platform.
