NFLXNetflixNeutralNetflixRDDTRedditBearishReddit

1w ago on

"internet stocks that aren’t growing users never work." Very true. Generally, buying into deteriorating fundamentals (in $RDDT's case, its US DAUs) is a bad idea, especially when the multiple has significant downside. If you only look at the trailing fundamentals and leave US DAUs aside, the numbers look incredible. But the market isn’t stupid; it only cares about the future. And declining search referrals, which seems to be an ACCELERATING trend (?), rightfully have the market worried, and coupled with a pivot to logged-in only - which I consider a big and bold move, but that comes with high uncertainty in so many regards - I wonder where we open today. I could see why lots of sellers want out here, and there will likely be fewer buyers. This moment also gives me strong Netflix 2022 $NFLX vibes I should say which turned out to be an excellent investment opportunity. But Netflix traded at close to 10x look-through operating income and $RDDT is nowhere near that territory (esp. if you adjust for SBC on the FCF side). Will think this through more throughout the day. There are likely easier bets to make.

NFLXNetflixBearishNetflix

2w ago on

Netflix $NFLX has been selling off for weeks now, and the stock trades roughly 50% below its all-time closing high. For a business of this quality, that is the kind of drawdown that usually gets me reaching for my valuation model to update my return expectations. This time I am holding back, and I want to be upfront about why, because my reasoning rests on a hunch – a gut feeling that is admittedly a poor foundation for any investment decision. But sometimes your instincts can be a strong tell still. Thus, I decided to share it anyway. I believe one of the most important skills an investor can develop is being a Bayesian updater, and that means taking small signals seriously before they show up in the numbers. My hunch is that consumer preferences are shifting permanently. Many people simply can't sit through a regular 45- or 60-minute episode anymore, let alone a 140-minute movie. I know people who skip whole segments of a series to get to the core of the story, and others who watch everything at 1.5x or even 2x speed. Almost everyone reaches for their phone halfway through. At the same time, new formats are emerging, often mobile first (I learned about the concept of microdramas last week; call me old), and they may well eat Netflix's lunch the same way Netflix once ate the lunch of the DVD rental business when it was the disruptor. AI as a risk vector is also sort of a black box. Netflix is still a great business, and I won't pretend otherwise. If consumer behaviour really is changing permanently, though, the risk profile looks very different from what it was historically, and that scares me. So I'll most likely stay on the sidelines here, however low Netflix goes.