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May 11 2015, 07.55am GMT


Up 64% so far this year, Netflix is easily the top performer 0n the Standard and Poor’s 500 versus less than 1% index median gain.

Netflix (NFLX) reported a blowout world-wide subscriber growth on the 15th April. This growth rate has prompted Wall Street to cut earnings estimates. The primary reason for this is that the fast growth seen in Netflix will require more spending on content. A comparison was drawn by one analyst of ESPN outspending competitors on sports fifteen years-ago to solidify the impressive profits it enjoys today.

This has resulted in Netflix’s forward price-to-earnings to balloon from slightly under 100 at the start of the year to more than 300 now. However, the higher number is misleading to an extent. The company is only slightly profitable today but after this year, its EPS (earnings per share) is set to multiply fifteen times over the next 4 years. This however, still sees Netflix priced ambitiously, at 25 times forecasted earnings all the way to 2019.

Meanwhile, up 14%, Apple (AAPL) continues to report incredible sales of its iPhone 6 which has a bigger screen. However, the smartwatch that has been newly launched is yet to prove that it’s a hit also. One positive sign towards good demand for the watch are the ones listed on eBay that have been selling for much more than the retail price. The company’s stock also trades fourteen times earnings. Apple holds cash & investments equal to greater-than 1 quarter of its market capitalization of $720 billion.

Also in the spotlight, up 35%, Amazon.com (AMZN) showed up on the list as somewhat an anomaly. After surprisingly reporting profitable results, its forward price-to-earnings ratio has decreased to the 400s from the 3000s. The number stays meaningless because of the low earnings base, 35 cents per share forecasted for this year, as the company invests to grow. The question remains – how profitable may it become? Venturing out to 2019, are seven analysts who average out their estimates for that year at almost $17 per share. That places the stock at twenty five times (distant) earnings. But the company sells through merchandise so fast that the cash it collects is more than the earnings it reports. This condition is not likely to change. Shares are also sold at fifteen times the forecasted 2019 free cash flow.

MT4 Chart: Netflix

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