Morningstar Rating

Stock Research and Analysis

by Neil Macker, CFA

Bulls Say

Netflix's internal recommendation software and large subscriber base give the company an edge when deciding which content to acquire in future years.
TV Everywhere from traditional pay TV distributors has been slow to roll out and largely replicates the linear experience, gifting Netflix with an extended window to remain the leading provider of Internet television in the U.S.
The FCC may implement strict net neutrality rules in the U.S., limiting the ability of broadband providers to charge Netflix for access. Read more 

Bears Say

The expansion into international markets is unprofitable today, and any material level of profitability may take five or more years to achieve.
Netflix relies on unlimited bandwidth for its online service, and its subscribers use the largest percentage, by far, of all Internet downstream traffic during peak hours. The move toward paid fast lanes by broadband providers could lower margins if the company cannot pass though price increases.
Netflix may be overpaying for content due to the presence of Amazon and Hulu. The entry of new competitors may exacerbate the rising cost of content. Read more 

Management

We rate Netflix's stewardship of shareholder capital as standard. Despite some missteps, chairman and CEO Reed Hastings successfully transitioned Netflix from a DVD rental service to the premier streaming video on demand service. Hastings founded Netflix   Read more 

Profile

Netflix's primary business is a streaming video on demand service available in the U.S., Canada, Central and South America, and Europe. Netflix delivers original and third-party   Read more 

Surprise: Earnings Turn Out Better Than Expected 
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