 Welcome to the channel. This is reliable Rudy Today we're going to fill a viewer request for Netflix. Thank you for the viewer requests I very I really appreciate the request and makes it easier for me to decide what video I'm going to make next so if anybody out There has listened to this video has a ticker that they want me to do an analysis on I'm more than willing to go over any ticker and share my opinion more than likely I probably don't have an individual holding on it. So you'll get a non-bias view From somebody I feel I feel I have a decent understanding of the process that I like to go through Maybe it doesn't work for you. Maybe you don't agree with it, but it works for me So if you like that point of view, I'm more than willing to give that point of view Now I have not looked through any of the financials here But I do have a couple points that I want to make before I dive into some of the financials But before we do any of that I'm not a licensed financial advisor Everything this video contains only my opinion and it's for entertainment purposes only like I said, I have no individual holding in Netflix I may own it in my index funds. I probably do But nonetheless Just sharing my opinion have nothing to gain nothing to lose So going into this first thing I want to state I just I this was the first thing that came to my head when I was making when I am starting this video on Netflix Netflix Started off their business as a rental business. They've rented out DVDs and they were not a very successful business But ultimately they were one of the first to get into the streaming and they They killed it. They they they timed it. Well, they they changed the game in terms of Streaming and they've definitely benefited from that. No question about it, but this is a very highly competitive space Netflix does not own the brands that some of their competitors own they have to pay for their content now They do have original content produced by Netflix. No question about that, but I have this pulled up right here These are all the companies that they pay For content look at this They have to pay for this content and then find a way to distribute that to make money It's not like like like for instance, I made an analysis on Disney Disney has all kinds of brands that they own They can share those brands through their streaming services and it does not cost them a thing Netflix has to pay for all of this Keep that in mind Now next we're gonna go into some of the financials Okay, revenue. They are profitable net income. Here's their profit margins Increased profit margins here today. I definitely want to go check in on that because the stock price is definitely hammered So that I'm already a little bit confused that they have increased profit margins from their five-year average But it's more than likely that from years 2017 up to before COVID They're probably unprofitable and they probably benefited from COVID a lot and that's probably tweaking some of their five-year numbers as well but I'm definitely gonna have to go look into the profit margin now gross margins 40% really not the greatest I mean, it's all right But price of sales matching up to those that gross margin and profit margins Yeah, I don't know seems still a little bit a little bit high to me now five-year average free cash negative 862 million so this already kind of leads into my statement that you know from 2017 to the 2020 they probably weren't doing that good as a business But nonetheless they are positive free cash flow year-to-date The other thing is the disconnect and PE so this is a big disconnect and PE coming off of the years 2020 and 2021 where they probably benefited in some sort especially with I would imagine with their revenue their revenue probably definitely benefited but the disconnect right here is telling me hey, there's probably decreased revenue and You know, how is that going to go moving forward? Especially being in a very highly competitive space increased interest rates and Yeah, that'll that'll lead me to some of the debt But going over more of these metrics negative return on assets now They do have a return on equity now this has to do with the shareholders that are investing into the business issuance of shares and Buying back shares. This is how it so they do a very good job of that But that but looking at this huge drop right here first thing that's going to go to my mind is How many shares did they dilute up here? If they if there is a massive share of dilution up here, then I'm definitely Just going to be turned off by this stock more than likely But we are going to check in on that the last thing that we want to look at is the return on best capital They over the last five years that they have not invested their capital very well and year-to-date, you know Nothing's really changed Before the last five years did they invest their capital? Well, you know, I don't know I'd have to go look at that So we will do that But yeah, nonetheless, you know a couple red flags are popped up here originally. So now let's take a look this eight pillars Okay, only only three percent shared. I wish I thought this number was going to be a lot higher We are going to go check in on the shares. Maybe they've been buying back shares before this Maybe they bought some shares leading up to COVID. I don't I don't know but Five-year average free cash flow is negative So we are going to have to touch base on the debt and go check that out and match that up to what type of free cash Well, can this company put up and then how much long-term liabilities? Do they have? We will touch base on return on best capital in this if if they don't invest their capital very well That doesn't necessarily mean okay, stay away from this business. Some companies just don't invest their capital really well That doesn't mean the company itself is bad But they do have revenue growth. We that is definitely going to be a one-two monitor and the net income growth Okay, the same thing with the five-year free cash flow price of free cash flow Their free cash flow five-year number is negative So we are gonna have to touch base tie in the debt free cash flow and all that stuff together. Oh Yeah, interesting. So let's start with the shares outstanding because this is this is a big kicker for me Uh, we are on quarterly let's switch this to the last four quarters Okay, so not too much share dilution, but right here did have some share dilution Pretty consistent share dilution actually been not not overly too much like I said over the last five years three percent It's not terrible. They could have I'm telling you guys They could have issued so many shares up here and you think this drop is bad Man if they issued a ton of shares up here this this drop is nothing this would have dropped underneath a hundred bucks if I had to guess It looks like we got to a low of around 174 if they issued a ton of shares up here, man, this would have tanked But nonetheless always got to keep in mind of the shares so Let's switch it to a quarter and see if they're starting the buyback shares not this price is down here Okay, so they're still issuing shares from this quarter So even with even with the decrease price down here guys, they're still not buying back shares They're still issuing shares so you got to keep that in mind this stock price is tank this much and This leads me to believe without even looking at anything that they're still struggling to find ways to pay debt So they still have to issue shares to find ways to pay that debt or else I mean what else are they gonna do if they if they have negative free cash over the last five years and year to day Only a hundred and sixty million they got to find ways to pay off their debt I mean they're gonna have to continue issuing shares when they issue even more shares if they aren't able to bring in free cash Low this is not the bottom Just gonna say that right now, and I haven't even done nothing with anything with the stock analyzer tool This is not a bottom if they have to continue diluting shares crazy to be able to pay off their debt So the next thing okay, this yeah, so they're still issuing shares But nonetheless, let's look at the revenue now. I can already see it's starting to decrease you can see massive increases Especially the year 2020. I mean we jump from five billion and we're now the next year From five from five point seven billion over seven billion. That's pretty good revenue growth Now you can see decrease revenue growth right there for sure and this isn't really that much It costs a good solds. Okay, cost of good solds is Going down from this year, but now it's starting to go back up higher interest rates And they probably have to charge more I would imagine or they're getting charged more by the people They're buying content from guys remember they're buying content from all of these guys These guys if their costs go up they got to charge Netflix more as well Or Netflix is gonna have to ultimately make a decision. Do we want this content? Do we need to cut this content? I mean there's so many things that go into when you're buying all this content from all these guys Okay Netpro net income. Let's check that. Okay, so Still growing that they are net income profitable. So now this leads me to think Net income is positive, but they're they're free cash flow is is borderline negative That that's all automatically going to strike a red flag for me So let's go check out the free cash flow before we look at the debt So I can see free cash flow last four quarters. Okay, so this has part of that 2021 year positive free cash flow All right. No, we're on quarterly. Okay. Oh, so quarterly. So yeah, oh my gosh I'm one quarter they drop this much in free cash flow and from this quarter they go from negative 570 million to okay got a couple acquisitions in here and it leading up to that no acquisitions at all is it possible that that Netflix is in the crosshairs right now and They're saying themselves. Yeah, we got to figure something out. Let's let's go look for an acquisition to maybe Generate something or maybe we can branch off that in some way shape or form So it's very interesting. No acquisitions leading up to this point and now they're starting to make acquisitions. I Would 100% make sure you go look into these acquisitions because there that is a little bit fishier Right there. I do not like that Let's switch this to a four quarters and see Yeah, guys look no acquisitions at all no acquisitions at all and now they they got to figure something out Okay, let's go make an acquisition. I Can guarantee that this is part of the reason why why Netflix dropped is because people seen okay They're they're starting to make an acquisition look at this changing net the capital expenditures right there. Oh my gosh Look at this increase in capital expenditures guys. Oh my where where are these capital expenditures going? You got to make sure you know that when you have a large increase in capital expenditures like this. Oh boy and Sure enough the 2020 year Here's the COVID year last four quarters This is part of that COVID year the second the third and fourth quarter of 2020 leading into this 1.4 billion in free cash flow now a huge decrease guys That that is a huge red flag there is no consistency in here and like I said leading up the COVID negative negative negative negative is This going to be a sustainable business going forward I'd net I haven't even looked at the long-term debt, but I can almost promise you that it's not going to look pretty Let's go look at the long-term debt. Oh boy Let's switch it on a we'll just keep it on quarterly Long-term life 19 19 billion dollars in long-term liabilities guys They cannot sustain positive free cash flow. They are in trouble. They are going to have to dilute tons of shares tons of shares they're gonna have to dilute and That is going to tank this stock price in my opinion I probably don't even need to do a valuation on on Netflix one It's going to be very hard to understand how those acquisitions are going to drive revenue to highly competitive space three Rising interest rates the people they're buying content from are probably gonna have to charge them more Netflix is gonna have to probably cut content and That is going to weaken Netflix as a company While their competitors have the content to be able to put on their streaming services Yeah guys this to me everything strikes a losing formula. I Would 100% watch out with this company Now I could be wrong in my analysis. Maybe I maybe I'm looking at something wrong But this I mean to be consistently net income right here and then the free cash flow negative negative negative negative negative negative negative The one year they have positive one point three nine billion is Corrweighting part of that COVID in year where there was lockdowns people were probably at home all-time low-interest rates Sitting there on a stimulus check living the dream Didn't feel like going anywhere because they felt financially set and Then boom huge decrease right here guys This this is not a winning formula and you can already see the acquisitions. They're making this is Yeah, not not impressed whatsoever. I thought I was actually gonna see a little bit more decent financials in this but this man And I feel bad for the people that are investing up here that didn't did that didn't see this coming because Me personally, this is not the bottom. This is going to keep dropping It's going to keep dropping now based off a charting aspect. This could end up getting a retrace, but you know Yeah, watch out with this one guys That's that's that's how I'm gonna end the video. I hope you guys enjoy the content if you disagree with me You know, I'm sorry for my my blunt opinion But nonetheless, it is my opinion. That's how I would play play Netflix probably just stay away from it And I'll see you guys on the next one