Netflix continues its impressive growth, growing revenue 16 % y-o-y in Q4 to $10.2 billion and net profit of $1.87 billion.
Netflix is a good example of executing a strategy where the company is moving in stages. For a long time, until it reached about 50 million paid subscribers in 2014, it was a low price and only movies and TV series that drove growth. Simplicity drove focus.
Since then price increases (at least every second year) has driven revenue growth together with paid subscriber growth. In the last few years advertising has been added as another revenue source.
And it seems like the ad-supported tier has increased Netflix’s appetite for sports and similar programming. Which it didn’t have for a very long time when it focused on movies and series. But now it needs to take another step to continue to grow and starts to add what it missed. It seems like a well-staged strategy.
While Netflix is not among the hottest stocks any longer (e.g. not a MAG7 member), its long-term returns show why it was a FAANG member. 35 % annualized return since its IPO almost 23 years ago adds up to one of the most valuable companies in the world.
