I purchased Netflix on June 20 at $19.71 per share. Netflix has dropped about 25 percent this year and I think now is a good time to buy on weakness. Competition with Blockbuster's aggresive pricing model and competition from video-on-demand have hit the stock.
Netflix is the largest online movie rental service offering 80,000 DVD titles to 6.8 million subscribers. I like Netflix's business model by using the Internet to manage customers and the Postal system to reach them, Netflix has been able to build it's business without drowning in red ink. On each dollar of non-cash assets it generates more than $4.50 in revenues and .30 cents in operating income.
Netflix's balance sheet has $388 million in cash, no debt, and not one inventory or accounts receivable cost. During the past three years, it has spent $381 million on new DVD titles for it's library.
Reed Hastings, Netflix chairman and CEO, has been the visionary ever since he founded the company 10 years ago. He now owns $60 million in Netflix stock.
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