• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Industrials

Jim Cramer: If Only Apple Had Bought Netflix When It Had the Chance

The programming is superior to everything out there.
By JIM CRAMER Jan 23, 2018 | 06:57 AM EST
Stocks quotes in this article: NFLX, AAPL

Netflix (NFLX) is bumming me out. Not because it wasn't a good quarter. It was insanely good. But because it could have been had, could have been bought, for literally half the price several years ago, and whoever bought it would now be king.

I am no investment banker. I am no technologist. My job is to figure out what's the best way for companies to allocate capital to bring out the best value. In this case, I repeatedly harped on the idea that Action Alerts PLUS charity portfolio holding Apple (AAPL) pay $35, $45 or even $50 billion for Netflix. In each case, that would have been a 100% premium, because Netflix understood the worldwide disintermediation of the web and the artificial intelligence of predicting what viewers would like regionally better than any company on Earth.

I know that Reed Hastings and company would have been reluctant to sell, but very few companies can turn down that kind of offer. If you owned Netflix, then you would never again have to remind analysts that you had a growing service revenue stream, because all they would care about is this stream.

The delivery mechanism is known -- the internet. The programming is superior to everything out there. All that was necessary was a machine to provide the best video experience, and that was Apple. Of course, it didn't have to be Apple. Everyone who is scrambling to make content was a candidate. Every distributor.

But, it didn't matter. It didn't happen.

Now, there are two ways to view Netflix. One is to recognize that artificial intelligence defies the critics and the street and two, the ability to raise capital is directly dependent upon tangible results. Both of these concepts explain why this company sells at a valuation that's greater than $100 million.

Let's take them one at a time.

First, there is a moment on the call where the chief content officer, Ted Sarandos, just a brilliant guy, talks about the success of Bright, the urban fantasy cop movie with Will Smith, which did the equivalent of more than $100 million in box office on its first weekend. Todd Juenger, the thoughtful interlocutor, talked about how it was widely panned by critics. Sarandos, explaining why it was a success, states: "the way to reconcile it is to recognize that the critics are an important part of the artistic process" but, he continues "they are pretty disconnected from the commercial prospects of the film."

Instead, he suggests you want to focus on "Google Trends" or "Rotten Tomatoes" or the ratings on IMDB. Plus, the critics are American, and they are uniquely out of touch with what people like overseas, which becomes more and more important given that the U.S. is about five million households from being maxed out, although of course, watching Bright at a movie theatre would have cost about a third of what a full year of Netflix costs.

That's in keeping with how Sarandos judges the potential success of a production: 30% algorithm and 70% percent data base. Remember, they know far more about what you would like because, unlike cable, which seems to care more about pleasing millions but often has dozens of stations that are a huge drag to click around, Netflix only wants to please one person: you.

Anyway, you could argue that anyone could have figured this out. I come back and say, they didn't. Now, though, everyone is pursuing home-grown productions. The missing element: first-mover advantage.

We check Netflix first. I go to "Jim", I see everything I want. How did they know I wanted the Punisher? How did they know I wanted the new Black Mirror? The answer? It's their job, and as long as they are good at it, Wall Street will keep paying for it, until it just doesn't matter. It will be game over and they will spew capital.

It's just that when it happens, the stock will be worth $150 billion, three times what Apple or anyone else of the big guns could have purchased it for.

A Netflix acquisition would have been a gamechanger. But as so often is the case, others thought they could duplicate it.

They didn't understand that it was and always will be a personal service that relies on the kindness of strangers to deliver their product -- a remarkable model that just keeps defying expectations, exactly what makes for the fabulous stock that it is.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jim Cramer was long AAPL, although positions may change at any time.

TAGS: Investing | U.S. Equity | Technology | Industrials | Consumer Discretionary | Earnings | Markets | Entertainment | How-to | Jim Cramer | Gaming | Mergers and Acquisitions | Stocks

More from Industrials

LyondellBasell Could Hold Temporarily Before Renewed Declines

Bruce Kamich
Jun 27, 2022 2:22 PM EDT

Let's take a look.

If These Stocks Are Any Indication, Investors Are Betting Against a Soft Landing

Bob Byrne
Jun 23, 2022 8:30 AM EDT

The sharp downward price action in a number of materials producers suggests traders believe a recession is right around the corner.

If You're Tired of Taking a Haircut on Losing Stocks, Get Mohawk

Paul Price
Jun 23, 2022 7:00 AM EDT

Now you can own a world leader industrial company at a ground-floor entry price.

Atkore Makes an Upside Breakout and Pullback

Bruce Kamich
Jun 9, 2022 12:15 PM EDT

Let's check the charts and indicators.

Bearish Bets: 3 Sluggish Stocks You Should Consider Shorting This Week

Bob Lang
May 15, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • 07:59 PM EDT PAUL PRICE

    Very Good Quarterly Numbers From Bassett Furniture (BSET)

    Bassett Furniture blew right through analysts es...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login