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No. of Recommendations: 7
P/E is a useful metric, but it’s not the best measure of value for every company. Netflix right now is in a mad dash for subscribers and is investing the cash that it is earning to grow the subscriber base, particularly internationally. Growing subscribers requires having good content and that content costs a lot of money. Domestically, Netflix is quite profitable but internationally they are losing money and this is putting a drag on earnings.

Should Netflix be penalized for this international expansion? Hardly. As they expand into new markets and these new markets mature they lose less and less money and eventually become profitable. Eventually, these international markets should be able to become as profitable as the domestic market. So I am quite happy for a Netflix to keep expand its subscriber base as they have shown this will lead to future earnings down the road. Subscriber growth is a much better metric for Netflix.

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