Here’s a captivating introduction to set the stage for the article: “The streaming revolution has taken the world by storm, and Netflix has been at the forefront of this seismic shift in the way we consume entertainment. Since its humble beginnings as a DVD-by-mail service, Netflix has evolved into a global giant, boasting a staggering 220 million subscribers across 190 countries. But as the company continues to expand its reach and diversify its offerings, investors are left wondering: where will Netflix stock be in three years? Will the streaming behemoth continue its upward trajectory, or are there stormy waters ahead? In this article, we’ll delve into the latest trends, financials, and expert insights to help you make an informed bet on the future of Netflix’s stock and uncover the potential for long-term growth.”
A Look Ahead: Amazon’s Future
Cost-Cutting and New Opportunities
Shares in this e-commerce conglomerate are near all-time highs. Can the rally continue? While it can be tempting to bet on flashy, smaller companies, blue chip behemoths like Amazon (AMZN) might also have a place in your portfolio. The technology conglomerate is far from its days of heady top-line growth, but cost-cutting and new opportunities in artificial intelligence (AI) could still unlock significant shareholder value.
Amazon has exploited the e-commerce market like nobody else for decades. Now, the company’s e-commerce business enjoys some exciting trends that could continue to unfold over the coming years. Second-quarter revenue increased by 10% year over year to $148 billion, driven by strong e-commerce sales.
Over the last few years, Amazon has dramatically cut costs in its core business — laying off thousands of redundant workers and streamlining its fulfillment strategy from a national network to a more efficient regionalized model. CEO Andy Jassy has also backed away from more risky ventures like “just walk out” checkout-free shopping to focus on more tried and true strategies, including self-checkout grocery carts at its brick-and-mortar Whole Foods stores.
Amazon’s e-commerce business: trends and growth drivers
- Second-quarter revenue increased by 10% year over year to $148 billion, driven by strong e-commerce sales
- Amazon has dramatically cut costs in its core business — laying off thousands of redundant workers and streamlining its fulfillment strategy from a national network to a more efficient regionalized model
- CEO Andy Jassy has backed away from more risky ventures like “just walk out” checkout-free shopping to focus on more tried and true strategies
Artificial intelligence (AI) opportunities in cloud computing
Amazon is protected from some of the uncertainty in the AI industry because of its focus on the infrastructure side of the industry with platforms like Bedrock, designed to help clients build customized AI algorithms using Amazon’s foundational models.
Generative AI has helped Amazon’s cloud computing segment, Amazon Web Services (AWS), grow second-quarter sales by 13% to $9.3 billion and operating income by 38% year over year to $7.2 billion.
Impact on shareholder value
With a forward price-to-earnings (P/E) multiple of 32, shares are slightly more expensive than the Nasdaq-100 average of 29. But this premium looks fair, considering the company’s cost-cutting efforts and opportunities for future growth in video streaming and AI.
E-commerce as a Cash Cow
Amazon’s e-commerce segment: operating margin and growth
The North American e-commerce segment’s operating margin jumped 58% year over year to $5.1 billion, while international e-commerce swung from a loss of $895 million to a gain of $273 million.
Amazon doesn’t break down its profits on a per-country basis. However, some international markets are likely more profitable than others, making this segment a great opportunity for future cost-cutting.
International e-commerce: opportunities for cost-cutting and growth
- The North American e-commerce segment’s operating margin jumped 58% year over year to $5.1 billion
- International e-commerce swung from a loss of $895 million to a gain of $273 million
- Some international markets are likely more profitable than others, making this segment a great opportunity for future cost-cutting
The role of Prime Video in the ecosystem
Prime Video is a good value compared to popular alternatives because it combines video streaming with shopping perks and discounts for a relatively low price of $14.99 per month.
According to an Evercore survey, 80% of Prime members watch Prime Video. And it isn’t hard to see why. The platform is known for popular shows like The Boys and expanded live sports offerings such as select NFL and NBA games.
Pivoting to New Growth Drivers
Amazon Prime Video: a good value compared to alternatives
Prime Video is a good value compared to popular alternatives because it combines video streaming with shopping perks and discounts for a relatively low price of $14.99 per month.
According to an Evercore survey, 80% of Prime members watch Prime Video. And it isn’t hard to see why. The platform is known for popular shows like The Boys and expanded live sports offerings such as select NFL and NBA games.
Generative AI and its potential impact on cloud computing
Amazon is protected from some of the uncertainty in the AI industry because of its focus on the infrastructure side of the industry with platforms like Bedrock, designed to help clients build customized AI algorithms using Amazon’s foundational models.
Generative AI has helped Amazon’s cloud computing segment, Amazon Web Services (AWS), grow second-quarter sales by 13% to $9.3 billion and operating income by 38% year over year to $7.2 billion.
The importance of AI infrastructure platforms like Bedrock
Bedrock is designed to help clients build customized AI algorithms using Amazon’s foundational models.
This focus on infrastructure has helped Amazon’s cloud computing segment, Amazon Web Services (AWS), grow second-quarter sales by 13% to $9.3 billion and operating income by 38% year over year to $7.2 billion.
Amazon’s Valuation: A Fair Premium
Reasonable P/E Multiple
With a forward price-to-earnings (P/E) multiple of 32, shares are slightly more expensive than the Nasdaq-100 average of 29. But this premium looks fair, considering the company’s cost-cutting efforts and opportunities for future growth in video streaming and AI.
The company’s cost-cutting efforts and growth prospects make its shares look set to outperform the market over the next three years.
Cost-Cutting and Growth: A Winning Combination
Amazon’s cost-cutting efforts and growth prospects make its shares look set to outperform the market over the next three years.
The company’s ability to balance short-term cost-cutting with long-term growth is a key factor in its success.
AMD: A Bargain Opportunity
Nvidia’s Dominance and AMD’s Catch-Up
Nvidia’s bellwether has been its computing and networking business, specifically its Hopper and Ampere graphics processing units (GPUs) have seen historical demand.
AMD has witnessed some considerable success with its MI300X data center GPU, with hyperscalers including Meta Platforms, Oracle, and Microsoft augmenting their Nvidia architecture with AMD’s MI300 accelerators.
AMD’s Growth Potential
- AMD’s data center business has grown from effectively nothing into a multibillion-dollar operation
- The company has seen its data center GPU business grow quarter after quarter
- AMD has an estimated 10% share of the GPU market, effectively making it an outright duel between AMD and Nvidia
A Future of Significant Growth
AMD is in a good position to continue disrupting Nvidia, with successor GPUs scheduled for release between this year and 2026.
Investors looking for more growth could eventually sour on Nvidia and turn to alternatives such as AMD.
Conclusion
So, where will Netflix stock be in 3 years? The Motley Fool’s analysis paints a picture of cautious optimism. While acknowledging the significant challenges Netflix faces, including increased competition and subscriber growth concerns, the article highlights the company’s enduring brand strength, global reach, and commitment to innovation. They argue that Netflix’s pivot towards ad-supported plans and content localization strategies could help mitigate these challenges and drive future growth. However, the success of these strategies remains to be seen. The streaming landscape is constantly evolving, with new players emerging and existing giants battling for market share. Netflix needs to continue to deliver compelling content, refine its pricing models, and adapt to changing consumer preferences to stay ahead of the curve. The next three years will be crucial for Netflix, a period that will determine whether they can weather the storm and solidify their position as a streaming industry leader, or if they will face a more turbulent future. For investors, the key takeaway is to view Netflix with a discerning eye, acknowledging both the potential for significant upside and the inherent risks involved. The streaming wars are far from over, and the ultimate victor remains to be crowned.