Netflix has hired Spencer Neumann, the recently ousted CFO of Activision. Activision did not say why they were terminating Neumann, but one might conclude, given the quick hiring by Netflix, that Neumann had been talking with another potential employee before Activision got wind of it.
On the surface, that news doesn't appear to be a big deal, until you learn that Neumann worked for Disney (DIS) before Activision. Given the ever-growing content on the Netflix platform, experienced leadership will be an absolute necessity. The growing of content presents a unique challenge.
Original content is expensive. While Netflix originally produced only a handful of shows, it only took a single winner like House of Cards to draw not only fantastic headlines and analysts' love, but also subscribers. A single winner also offset the costs of original shows that fell flat.
Netflix has added to its winners. Stranger Things has been a huge score for the company (we'll get a season 3 in the summer of 2019), but the amount of original content is basically increasing exponentially. Sub-growth, revenue, and profits are not, however.
Netflix needs this content as Disney is not only pulling theirs from the platform, but also buying Twenty-First Century Fox (FOXA) assets and launching a competing service. I imagine that's why we see Neumann in at the CFO position.
So, Netflix continues to churn out more and more content, finding niches of programming to attract any and all possible viewers. The problem with niches is they are just that. Niches. They appeal to a finite group of viewers. Finite does not equal big top-line and bottom-line growth. Additionally, advertisers of niche products likely aren't looking for a platform like Netflix and the large advertisers probably aren't seeing a ton of uptick in business from the Netflix niche viewers.
That's not to say Netflix won't continue to be successful, but it does lead one to theorize that the company is quickly morphing into a traditional media company. The company's big advantage had been the cable company work around with direct-to-consumer streaming. This advantage will completely fade over the next few years.
In short, Netflix's near triple-digit P/E multiple and PEG ratio around 1.50 both won't last. Growth will suffer from the law of large numbers, if nothing else, but there is something else, as I discussed above.
From a technical perspective, Netflix bulls could benefit from a close this week above $275. This would push the stock above the 10-week simple moving average (SMA) as well as the bubble resistance above the current price.
Support on the weekly chart, above, sits way down around $230, so exiting the current range during January is a key need for bulls. Indicators have been oversold and the bullish divergence in the StochRSI is a glimmer of hope; however, it hasn't been the strongest secondary indicator for Netflix.
I would put my focus on price during the first quarter. Above $275 and I'd be comfortable long for an intermediate trade (several months), but under $275 and there's no big need to own this one.