Through the recent battle between Netflix and Paramount about acquiring Warner's Brothers, investors have been very bearish about Netflix, selling it off. Now Netflix is trading at one of the lowest it's traded in 52 weeks.
This creates one of the best buy opportunities that I can see in the market right now. Although cheap companies don't always mean a buy, in this case Netflix is. With over 350 million subscribers and continuing to grow, ever growing different streams of income, Netflix stays the most used streaming service worldwide. There is a reason it's called Netflix and chill not hulu and chill or amazon prime and chill. The hold Netflix has on the streaming service market will not just disappear because of this deal. The regular watchers of Netflix most likely do not even know of this potential acquisition.
Secondly, investors are worried about an all cash deal instead of with shares. However, this is a sign the company is sharing with us, that Netflix believes that it is undervalued and hence will not buy with shares because they believe it will grow in the future and is an unfair deal. Although it will put Netflix in debt, their strong profit margin of 29.5% that is growing even now puts them in a perfect spot to pay off this debt including the rights to all the WB shows and movies. You cannot create movies like Harry Potter and the DC movies and build a fanbase like that from scratch. This puts Netflix in an ideal position if the deal does goes through.
Lastly, Netflix has been exploring a wide range of income streams such as streaming Alex Honnold's climb up Taipei 101, sport and live streams will allow Netflix to capture an even larger market share.
For all these reasons, I believe that Netflix is significantly undervalued and once investors realise this, will come back to it's fair value.
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