Motley Fool: Netflix stock may merit closer look
Shares of streaming-movie provider Netflix (Nasdaq: NFLX) got a standing ovation from investors after the company delivered stellar fourth-quarter results.
What a ride it’s been for Netflix shareholders. First, Netflix was the hottest thing since volcano lava. Then it tried to shake things up and split off its DVD business, and suddenly the stock was colder than an arctic glacier. Now, as the company once again is convincing the market that its growth story is far from over, the shares have been advancing.
In its fourth quarter, Netflix managed 73 cents in per-share earnings on $876 million in revenue. Analysts were expecting earnings per share to come in at just 55 cents. More important, the company said that it finished the quarter with more than 26 million total global subscribers, suggesting that the subscriber defections many were concerned about may simply have been a blip. Domestic subscribers were up 25 percent year-over-year.
Has the company fully addressed concerns about encroaching competition from Hulu and Amazon.com? Not yet. Will its international push end up paying off? That remains to be seen.
The stock is not without risks, but it’s more of a bargain than it was last year, when it traded at far higher prices. Still, anyone buying now better be prepared for volatility. (The Motley Fool owns shares of Amazon.com. Our newsletter services have recommended both Amazon.com and Netflix.)
Ask the Fool
Q: My stocks have dividend yields ranging from less than 1 percent to more than 3 percent. What’s a good number? Should I sell the low-yield ones and buy more of the high-yield ones? – M.E., Vail, Colo.
A: It may seem that the higher the yield, the better, as it means you’ll collect more money from your investment. But companies with low or no dividend payments can also be terrific holdings. They may have more pressing uses for their excess cash than paying it out to shareholders. For example, if they plow it back into the company to help it grow, shareholders can also benefit.
Meanwhile, among firms that do pay dividends, check out just how quickly that dividend has been growing. A 1 percent yield can be more attractive than a 2 percent one – if the company has hiked its dividend by an annual average of 15 percent in recent years. If so, you might expect that dividend to quadruple over a decade, while the latter one, if it grows at just 4 percent on average, may not even double.
Consider that while both Home Depot and Aflac recently had yields of 2.7 percent, Home Depot’s five-year average dividend growth rate is 5 percent, and Aflac’s is 12 percent.
Q: How can I learn when various earnings reports will be released? – S.C., Saratoga Springs, N.Y.
A: You can always call the company itself. (Ask for the investor relations department.) Online, click over to biz.yahoo.com/research /earncal/today.html, type in the firm’s ticker symbol, and presto – earnings date info.
My dumbest investment
A while back, I fell into the whole idea of penny stocks, and I put a large amount of my cash into one stock. It ended up going bankrupt, and I lost around four grand. I sulked for a long time. It was a good learning experience, though. I realized that you can’t really expect to make huge profits overnight. I got into pennies in the first place by investing in companies such as Citigroup, when they were trading for peanuts after the credit bubble burst. I made good money on their recoveries. – J.G., Mankato, Minn.
The Fool responds: Citigroup’s stock price did plunge below a dollar, but with its gobs of assets and money-making businesses, it was never a classic penny stock. The typical penny stock is tied to a risky and unproven company, and its stock price is easily manipulated by hypesters who promise fast, huge gains. It’s usually best to avoid any stock trading for less than $5 per share.