Don’t you love Netflix?


Absolutely – Ozarks, Maid, The Crown

all brilliant

Well, you can’t be happy by the 21% fall in the share price after results?

Doesn’t bother me – don’t own it

But you said you love it?

Well as I’ve said before,

I love my mattress, but it doesn’t mean I buy a bedding company

You know the rule – “Real Returns”

Or as Jerry McGuire put it when he yelled down the phone


Have you heard about their new series, just released?

“Overpayn” or is it “Overpain”?

About investors who Overpay

Then HODL – Hold On for Dear Life

And suffer pain or is it “payn”?

They get “HODLLED”

No, sounds like psychological horror

not my genre

unless Nicole Kidman or Margaret Qualley are the leads

Maybe they read that Fund manager investor letter saying that you could’ve paid a “Justified P/E” ratio of

281 for L’Oreal,
241 for Altria or
230 for Lindt

in 1973

and still received a 7% return p/a for 46 years

Oh, I know the guy

A superstar, lives on an island, runs a £26bn fund

Which he only started in 2010.

I launched in 2008 but only have $90m

so he wins (so far)

But hey, I also live on an island – albeit slightly muddier

He’s a clever guy, so I’m not doubting his maths

But 2 points:

1.      You must know the business will survive for 46 years & how do you know that?

L’Oreal wasn’t the only cosmetics company in 1973. Many others failed, I’m sure.

Ditto for chocolatiers.

If you backed the wrong horse, you weren’t so lucky and don’t most horses look fit in the parade ring?

2.      A higher PE is easier to justify for smaller companies that can grow

I only have price data from 1979 when L’Oreal was €0.595 per share

multiplied by 633m shares in issue

= €377m market cap

Easier to compound a €377m company than a € 212bn one

isn’t it?

especially in a changing world with Kim K & her TikTok mates launching beauty brands daily

Still, at least we islanders are aligned on:

Checkpoint – both like
Chinese stocks – don’t like (ok, I hate)

So can we pay any price for Netflix?

Revenue & Operating income are up

Reed Hastings is a genius

But can it, “Show me the money”?

Last year, we all stayed home watching tv – subscribers & revenue soared

Actors couldn’t social distance, meaning lower content costs

Revenue was $30bn

and operating margin an all-time high of 18%

in perfect conditions

222m subs, up 9%

Now let’s stargaze for 3 years

Revenue guidance for Q1 only +10% – competition increasingly problematic

But let’s pretend $45bn of revenue in 2024

14% CAGR

at peak margins?

maybe competition offsets leverage?

Seems aggressive, but ok

Lop off $1bn for interest – cash flow is still negative

Tax 12% ?

seems low, but ok

= net income $5.7bn

So what’s the exit PE?

More mature in 3 yrs so expect some de-rating

Say 20x earnings?

Ok, market cap = $114bn


$177bn today

-36% !


using optimistic assumptions?

Jerry McGuire would not be happy

No wonder there’s “payn” about