The discussion revolves around the outlook for Netflix, with a focus on its financial performance and potential growth strategies. The speaker, Mark, shares his perspective on the company's recent earnings report. He highlights two key points: the company's operating margin expansion and the impact of the recent movie industry strike on Netflix's content.
Mark notes that the company's historical practice has been to steadily increase its operating margin, but the Chief Financial Officer (CFO) indicated a slower pace of growth going forward. This could potentially limit the upside to pointing bucks in earnings in 2025. However, Mark also points out several levers that Netflix could use to accelerate margin expansion and suggests that the company's new initiatives, such as page sharing and the rollout of ad-supported offerings, could drive growth in international markets.
The speaker also discusses the potential impact of the recent movie industry strike on Netflix. He notes that while the strike creates content gaps and could delay the implementation of a price increase, it could also create opportunities for new content in the long term.
Mark concludes by expressing optimism about Netflix's future, particularly in international markets, and suggests that the company's new initiatives could drive significant growth. He also expresses concern about mounting concerns about consumer behavior, particularly in the U.S., and suggests that these could potentially lead to trade-down or cancellations for Netflix. However, he believes that the company's new strategies and the growth potential in international markets could help mitigate these risks.
1. The conversation is between Mark Mahaney and another individual, who seems to be a financial analyst.
2. Mahaney is asked for his perspective on Netflix's future.
3. Mahaney mentions two negatives: the company's operating margin expansion, which has historically been slower than expected, and the company's CFO's statement that they won't grow the margin as quickly in the future.
4. Mahaney speculates that the most optimistic estimates would have expected a larger margin expansion, but he's unsure of the real guidance.
5. He notes that there's a debate over Netflix's pricing and the company's average revenue per member in the fourth quarter.
6. Mahaney is cautious or slightly less bullish about the operating margin commentary from the CFO.
7. He believes that this could mean less upside to pointing dollars at earnings in 2025.
8. Mahaney estimates that the Bulls on the stock are higher than 20, closer to 21.
9. Mahaney discusses the impact of a recent Rider strike on Netflix, which he sees as a negative for the near term but a positive for the long term due to new initiatives.
10. He mentions Netflix's new initiatives, including page sharing and an ad-supported offering.
11. Mahaney believes that these initiatives will lead to more incremental subscribers in international markets.
12. He expresses a preference for a price target below 400 for Netflix, which he sees as aggressive.
13. Mahaney discusses data points that could signal a trade down or cancellation for Netflix, such as mounting concerns about the consumer and the trade down effect.
14. He notes that there's a mature U.S. market for Netflix, with lower satisfaction scores and higher churn indications compared to international markets.
15. He believes that the growth has to come from international markets, where satisfaction rates are higher and there are fewer at-home entertainment options.
16. Mahaney suggests that the company's lower price points and ad-supported offerings could be another leg of growth for Netflix.
17. He concludes by expressing optimism about Netflix's ability to produce future hits.