We touched on this in an earlier post, but just commenting on it doesn’t do it justice. What we are referring to is the returns of Amazon.com (AMZN) and Netflix (NFLX) since their respective IPOs. While the gains in AMZN seem like a once in a lifetime type move, shares of NFLX have actually had a bigger run in their first 15 years as a public company than AMZN. In the chart below, we have calculated the growth of $100 invested in AMZN at the time of its IPO. We have also overlaid the performance of $100 invested in NFLX since its IPO as if their IPOs were at the time time. What’s incredible to note is that 15 years into the life of AMZN as a public company, $100 invested in its IPO was worth $11,460. If you had invested $100 in NFLX at the time of its IPO, however, it would be worth $14,600, or 27% more!
So can NFLX keep up the momentum for another five years? It will certainly be a tough pace to keep up, and in order to do so, it would have to rally another 233% from here to a level of $524 per share. Assuming that the company’s share count remains the same during that period (highly unlikely), it would equate to a market cap of about $226 billion. That’s quite a market cap for a streaming video company and would be more than $50 billion ahead of Disney (DIS). In order to get there, we would think NFLX would have to expand into a new or complementary line of business just like AMZN — another company with a “visionary” founder/CEO — managed to do. If there was someone to bet on doing that, you could do a lot worse than Reed Hastings. It’s hard to understate just how important the company’s successful shift from mail-order to streaming was in its trajectory. Even more impressive was just how ahead of the curve (and derided) Hastings was when he made that decision.
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