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RT @AsifSuria: This recent surge in Netflix's $NFLX towards a price of $1,000 per share reminded me of a little thought exercise I went through with a friend in late 2021 and once again a few weeks ago when he reached out to me.
His wife works at Netflix and like all employees, has a unique perk that allows her to invest part or all of her salary in Netflix options at 40% of the price of Netflix stock at the start of each month.
Yes you read that right, all of her salary!
The rest of this post is a thought exercise and not investment advice or even a suggestion on how much of their salary Netflix employees should allocate to this perk.
Paying 40% for options might sound very expensive but the kicker here is that these options expire after 10 years.
In other words, if Netflix stock is up more than 40% of current price 10 years from now, you made a good decision. But not so fast young padawan.
That money invested has to be adjusted for the fact that $100 in 2035 is not going to be worth the same as $100 now.
For example according to the U.S. Bureau of Labor Statistics, you needed $134.41 in December 2024 to buy the same goods you could have purchased for $100 in December 2014.
The calculation above simply used the official rate of inflation to figure out how much the value of the dollar eroded over the last 10 years.
Considering buying options on Netflix is a significantly more risky bet than say investing in U.S. treasury bonds, instead of using the rate of inflation, you would be better served by using a "hurdle" rate that reflects your expected return from a risky investment.
Let us assume this hurdle rate is 15%. Folks can adjust this hurdle rate as they see fit.
Netflix stock closed trading on December 31, 2024 at $891.32. The 10 year options at 40% of the stock price would have cost $356.48.
Applying a 15% hurdle rate, Netflix stock would have to trade at $2,333.48 per share and a market cap of $1.02 trillion.
Netflix repurchased a little over 3% of its shares outstanding over the last four years. If they accelerate this some more and eventually retire 10% of shares outstanding (after dilution) in 10 years, the market cap will be close to $920 billion.
With several companies including $AAPL, $NVDA and $META trading with market caps well above $1 trillion right now, this expected rise in Netflix stock is not out of the realm of possibilities.
Can a media/entertainment company achieve such a lofty valuation? If a car (robotaxi?) company like $TSLA can achieve a valuation of over $1.35 trillion, why not, say some market participants.
If we were for a minute to subscribe to the theory that we are near the top of a stock bubble, then what does a rational tool like a DCF model tell us about Netflix's valuation 10 years from now?
A very simple reverse DCF model with a 10% discount rate and a 2% terminal growth rate tells us that Netflix will need to grow its earnings at or over 40% for the next three years and then continuing growing double digits the following seven years.
Considering Netflix grew earnings 65% in 2024, this is not entirely pie in the sky but is very optimistic.
Life is not linear and companies experience both a period of expansion and contraction. You can also see this with Netflix where after years of amazing earnings growth, earnings declined in 2022 and then growth was moderate in 2023, when earnings grew 21%.
This is one of the reasons I scaled back part of my personal position in Netflix when the stock was trading around $927 last month.
I still believe the future will be bright for Netflix but I am less excited about the stock now than I was when I first started a position a few years ago.
Fortunately for Netflix employees, th[...]
RT @AsifSuria: This recent surge in Netflix's $NFLX towards a price of $1,000 per share reminded me of a little thought exercise I went through with a friend in late 2021 and once again a few weeks ago when he reached out to me.
His wife works at Netflix and like all employees, has a unique perk that allows her to invest part or all of her salary in Netflix options at 40% of the price of Netflix stock at the start of each month.
Yes you read that right, all of her salary!
The rest of this post is a thought exercise and not investment advice or even a suggestion on how much of their salary Netflix employees should allocate to this perk.
Paying 40% for options might sound very expensive but the kicker here is that these options expire after 10 years.
In other words, if Netflix stock is up more than 40% of current price 10 years from now, you made a good decision. But not so fast young padawan.
That money invested has to be adjusted for the fact that $100 in 2035 is not going to be worth the same as $100 now.
For example according to the U.S. Bureau of Labor Statistics, you needed $134.41 in December 2024 to buy the same goods you could have purchased for $100 in December 2014.
The calculation above simply used the official rate of inflation to figure out how much the value of the dollar eroded over the last 10 years.
Considering buying options on Netflix is a significantly more risky bet than say investing in U.S. treasury bonds, instead of using the rate of inflation, you would be better served by using a "hurdle" rate that reflects your expected return from a risky investment.
Let us assume this hurdle rate is 15%. Folks can adjust this hurdle rate as they see fit.
Netflix stock closed trading on December 31, 2024 at $891.32. The 10 year options at 40% of the stock price would have cost $356.48.
Applying a 15% hurdle rate, Netflix stock would have to trade at $2,333.48 per share and a market cap of $1.02 trillion.
Netflix repurchased a little over 3% of its shares outstanding over the last four years. If they accelerate this some more and eventually retire 10% of shares outstanding (after dilution) in 10 years, the market cap will be close to $920 billion.
With several companies including $AAPL, $NVDA and $META trading with market caps well above $1 trillion right now, this expected rise in Netflix stock is not out of the realm of possibilities.
Can a media/entertainment company achieve such a lofty valuation? If a car (robotaxi?) company like $TSLA can achieve a valuation of over $1.35 trillion, why not, say some market participants.
If we were for a minute to subscribe to the theory that we are near the top of a stock bubble, then what does a rational tool like a DCF model tell us about Netflix's valuation 10 years from now?
A very simple reverse DCF model with a 10% discount rate and a 2% terminal growth rate tells us that Netflix will need to grow its earnings at or over 40% for the next three years and then continuing growing double digits the following seven years.
Considering Netflix grew earnings 65% in 2024, this is not entirely pie in the sky but is very optimistic.
Life is not linear and companies experience both a period of expansion and contraction. You can also see this with Netflix where after years of amazing earnings growth, earnings declined in 2022 and then growth was moderate in 2023, when earnings grew 21%.
This is one of the reasons I scaled back part of my personal position in Netflix when the stock was trading around $927 last month.
I still believe the future will be bright for Netflix but I am less excited about the stock now than I was when I first started a position a few years ago.
Fortunately for Netflix employees, th[...]
Offshore
InsideArbitrage RT @AsifSuria: This recent surge in Netflix's $NFLX towards a price of $1,000 per share reminded me of a little thought exercise I went through with a friend in late 2021 and once again a few weeks ago when he reached out to me. His wife…
ey get new options at 40% of current cost at the start of each month and in some ways dollar cost average the cost of their options.
I can see this perk working out wonderfully in years where Netflix's stock is down in the dumps like it was in 2022.
Note: This is an edited version of an earlier post that had a calculation error.
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I can see this perk working out wonderfully in years where Netflix's stock is down in the dumps like it was in 2022.
Note: This is an edited version of an earlier post that had a calculation error.
$NFLX Netflix Surges After-Hours! ⏫ +14.40%
🎬 The streaming giant reported better than expected Q4 results and hiked its stock buyback by $15B (🔄 4% of its $371.75B market cap).
💰 Total buyback authorization now stands at $17.1B, following a previous approval in Sept 2023
📊 In 2024, Netflix repurchased 9.9M shares for $6.2B, bringing total buybacks to $12.9B since program inception
https://t.co/B772mNWlXB tweet
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💰 $MTB M&T Bank Corporation Announces a new $4 billion stock repurchase program
💸This represents ~12% of its current market cap of $32.45 billion
💸The authorization replaces & terminates the prior $3 billion share repurchase plan of July 2022
💸In Q3 2024, the bank repurchased 1.2 million shares of its common stock at an average cost per share of $166.40 for $200 million
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💰 $MTB M&T Bank Corporation Announces a new $4 billion stock repurchase program
💸This represents ~12% of its current market cap of $32.45 billion
💸The authorization replaces & terminates the prior $3 billion share repurchase plan of July 2022
💸In Q3 2024, the bank repurchased 1.2 million shares of its common stock at an average cost per share of $166.40 for $200 million
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Stock Analysis Compilation
Platinium AM on Toyota $7203 JP
Thesis: Toyota is maintaining industry leadership with record high earnings and strong demand for hybrids while effectively navigating production challenges.
(Extract from their Q4 letter) https://t.co/oWQXUrQhpv
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Platinium AM on Toyota $7203 JP
Thesis: Toyota is maintaining industry leadership with record high earnings and strong demand for hybrids while effectively navigating production challenges.
(Extract from their Q4 letter) https://t.co/oWQXUrQhpv
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4Q'24 Heartland Value Fund on $DK, $PDCO, $XRAY
More fund letters here:
https://t.co/dVDkhhwsJS https://t.co/L8tGQm6yso
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4Q'24 Heartland Value Fund on $DK, $PDCO, $XRAY
More fund letters here:
https://t.co/dVDkhhwsJS https://t.co/L8tGQm6yso
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✈️ $GE GE Aerospace reports strong Q4 with top and bottom line beating estimates, plans $7B buyback in 2025 while increasing dividend by 30%; expects another year of substantial growth in 2025
✈️Repurchased shares worth $4.9B in FY'24 under current $15B authorization
Chairman and CEO H. Lawrence Culp, Jr. :“GE Aerospace delivered a strong finish to 2024 given robust demand for our services and products with fourth quarter orders up 46%, EPS more than doubling, and free cash flow increasing over 20%. Our performance capped off a monumental first year as a standalone company with $1.7 billion of profit growth and $1.3 billion of free cash flow growth.”
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✈️ $GE GE Aerospace reports strong Q4 with top and bottom line beating estimates, plans $7B buyback in 2025 while increasing dividend by 30%; expects another year of substantial growth in 2025
✈️Repurchased shares worth $4.9B in FY'24 under current $15B authorization
Chairman and CEO H. Lawrence Culp, Jr. :“GE Aerospace delivered a strong finish to 2024 given robust demand for our services and products with fourth quarter orders up 46%, EPS more than doubling, and free cash flow increasing over 20%. Our performance capped off a monumental first year as a standalone company with $1.7 billion of profit growth and $1.3 billion of free cash flow growth.”
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Startup Archive
Chamath Palihapitiya on the growth principles that got Facebook to billions of users
“The most important thing we did was I teased out virality, and said, ‘You cannot do it. Don’t talk about it. Don’t touch it. I don’t want you to give me any product plans that revolve around this idea of virality. I don’t want to hear it.”
Instead, Chamath urged the growth team at Facebook to focus on “the three most difficult and hard problems that any consumer product has to deal with”:
1. How do you get people in the front door?
2. How do you get them to an aha moment as quickly as possible?
3. How do you deliver core product value as often as possible?
Chamath warns that focusing on virality is why you see so many startups experience this amazingly steep rise and then fall off a cliff.
The second thing he set out to do at Facebook was invalidate all of the lore:
“In any given product, there’s always people who strut out around the office like, ‘I have this gut feeling.’ It’s all about gut feeling. And most people’s gut feelings are morons. They don’t know what they’re talking about. Gut feel is not useful because most people can’t predict correctly. We know this. So one of the most important things that we did was just invalidate all of the lore… You can’t believe your own BS. Because when you do, you start to compound these massively structural mistakes that don’t expose core product value… You don’t listen to customers because you think it’s all about your gut. You don’t bother doing any of the traditional, straightforward, obvious things, and you lose yourself.”
As Chamath explains, a maniacal focus on delivering core product value as frequently and fast as possible is what led Facebook to its most important realization:
“The single biggest thing we realized was to get any individual to 7 friends in 10 days. That was it… There was not much more complexity than that. There’s an entire team now of hundreds of people that have helped ramp this product to a billion users, based on that one simple rule — a very elegant statement of what it was to capture core product value… And then what we did at the company was talk about nothing else. Every Q&A. Every all-hands… It was the single, sole focus.”
He continues:
“You have to work backwards from: What is the thing that people are here to do? What is the ‘aha moment’ that they want? Why can I not give that to them as fast as possible? That’s how you win.”
Chamath recommends starting with a cohort of your most engaged users — What features are they using? What pathways in your product did they take? Then work backwards and try to get all of your other users to that same state.
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Chamath Palihapitiya on the growth principles that got Facebook to billions of users
“The most important thing we did was I teased out virality, and said, ‘You cannot do it. Don’t talk about it. Don’t touch it. I don’t want you to give me any product plans that revolve around this idea of virality. I don’t want to hear it.”
Instead, Chamath urged the growth team at Facebook to focus on “the three most difficult and hard problems that any consumer product has to deal with”:
1. How do you get people in the front door?
2. How do you get them to an aha moment as quickly as possible?
3. How do you deliver core product value as often as possible?
Chamath warns that focusing on virality is why you see so many startups experience this amazingly steep rise and then fall off a cliff.
The second thing he set out to do at Facebook was invalidate all of the lore:
“In any given product, there’s always people who strut out around the office like, ‘I have this gut feeling.’ It’s all about gut feeling. And most people’s gut feelings are morons. They don’t know what they’re talking about. Gut feel is not useful because most people can’t predict correctly. We know this. So one of the most important things that we did was just invalidate all of the lore… You can’t believe your own BS. Because when you do, you start to compound these massively structural mistakes that don’t expose core product value… You don’t listen to customers because you think it’s all about your gut. You don’t bother doing any of the traditional, straightforward, obvious things, and you lose yourself.”
As Chamath explains, a maniacal focus on delivering core product value as frequently and fast as possible is what led Facebook to its most important realization:
“The single biggest thing we realized was to get any individual to 7 friends in 10 days. That was it… There was not much more complexity than that. There’s an entire team now of hundreds of people that have helped ramp this product to a billion users, based on that one simple rule — a very elegant statement of what it was to capture core product value… And then what we did at the company was talk about nothing else. Every Q&A. Every all-hands… It was the single, sole focus.”
He continues:
“You have to work backwards from: What is the thing that people are here to do? What is the ‘aha moment’ that they want? Why can I not give that to them as fast as possible? That’s how you win.”
Chamath recommends starting with a cohort of your most engaged users — What features are they using? What pathways in your product did they take? Then work backwards and try to get all of your other users to that same state.
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AkhenOsiris
$FLUT $DKNG
FOS:
Prediction Market Company Kalshi to Launch Super Bowl Betting
Kalshi filed with the CFTC to list Super Bowl betting odds. Industry observers wonder whether exchanges could disrupt traditional sportsbooks.
There’s been discussion in sports business circles about how much of an existential threat exchange-based sports betting poses for traditional sportsbooks like FanDuel and DraftKings.
The exchanges are available in all 50 states, whereas sportsbooks are not available in about a dozen states, including California and Texas. And exchanges can offer substantially lower “vig” on bets since they are peer-to-peer as opposed to the public betting against the house.
This month Kalshi began offering odds on which NFL coaches would be hired by various teams with vacancies, including the Bears (who have landed Ben Johnson) and the Jaguars.
Right now, exchanges are dipping their proverbial toes in the water of futures wagers. But if and when they start offering single-game odds and player props, they’ll pose a much greater threat to the traditional sports betting industry. frontofficesports.com/predic…
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$FLUT $DKNG
FOS:
Prediction Market Company Kalshi to Launch Super Bowl Betting
Kalshi filed with the CFTC to list Super Bowl betting odds. Industry observers wonder whether exchanges could disrupt traditional sportsbooks.
There’s been discussion in sports business circles about how much of an existential threat exchange-based sports betting poses for traditional sportsbooks like FanDuel and DraftKings.
The exchanges are available in all 50 states, whereas sportsbooks are not available in about a dozen states, including California and Texas. And exchanges can offer substantially lower “vig” on bets since they are peer-to-peer as opposed to the public betting against the house.
This month Kalshi began offering odds on which NFL coaches would be hired by various teams with vacancies, including the Bears (who have landed Ben Johnson) and the Jaguars.
Right now, exchanges are dipping their proverbial toes in the water of futures wagers. But if and when they start offering single-game odds and player props, they’ll pose a much greater threat to the traditional sports betting industry. frontofficesports.com/predic…
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🚨 Aptiv $APTV Plans to Spin Off Its Electrical Distribution Systems Business.
🌍🚗The Board has approved the separation of its Electrical Distribution Systems (EDS) business, creating two independent companies.
🔌 Aptiv Post-Spinoff: Focused on advanced safety, electrification, and automation with a sensor-to-cloud technology stack serving industries like automotive, telecom, and aerospace.
⚡ EDS Post-Spinoff: Specializing in low and high-voltage electrical architectures for vehicles, with a focus on electric vehicle growth and optimized systems for OEMs. 🚘
🗓️ Timeline: The spinoff is expected to be completed by March 31, 2026, pending approvals, tax opinions, and regulatory filings.
The transaction is expected to be tax-free to Aptiv and its shareholders for both Swiss and U.S. federal income tax purposes.
🔜 Aptiv will release Q4 2024 results on February 6, 2025
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🚨 Aptiv $APTV Plans to Spin Off Its Electrical Distribution Systems Business.
🌍🚗The Board has approved the separation of its Electrical Distribution Systems (EDS) business, creating two independent companies.
🔌 Aptiv Post-Spinoff: Focused on advanced safety, electrification, and automation with a sensor-to-cloud technology stack serving industries like automotive, telecom, and aerospace.
⚡ EDS Post-Spinoff: Specializing in low and high-voltage electrical architectures for vehicles, with a focus on electric vehicle growth and optimized systems for OEMs. 🚘
🗓️ Timeline: The spinoff is expected to be completed by March 31, 2026, pending approvals, tax opinions, and regulatory filings.
The transaction is expected to be tax-free to Aptiv and its shareholders for both Swiss and U.S. federal income tax purposes.
🔜 Aptiv will release Q4 2024 results on February 6, 2025
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