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Netflix and Square


IN THIS ISSUE


Netflix

We have some thoughts that will change your mind about why Netflix is undervalued in one word: “Starlink"


Square

They continued to do well during the pandemic. With the economy reopening, they should be able to do even better.

Netflix: NFLX 

This internet company offers a subscription for users to watch popular movies and has exploded in value during the pandemic. We think many see this as overbought, however, we see this company doubling in value due to the side effects of a program that another company has orbiting over our heads at the moment. SpaceX which is a private rocket company founded by Elon Musk, has a part of its business called Starlink. They have in a nutshell made Wi-Fi in every single place around the globe possible using arrays of satellites that sit over our heads. All you have to do is pay $99 USD a month and have a laptop or smartphone. We think this will be a major win for many streaming companies such as Netflix, Disney and other internet companies and do not believe that the stock market is in a bubble. Starlink initiates this August, we think we will see the effects of this service first in the computer and streaming industries as people from everywhere can now watch TV and movies. This will open the doors to much of the developing world and allow consumers to pay for this service everywhere. 8 billion people will have access to this. We think Apple, and Amazon will be large beneficiaries, however we can’t be sure of the timeline, due to the infrastructure needed to distribute their products across the globe. 


We think the most immediate beneficiaries of Starlink will be Facebook, Netflix, and Disney. Keep your eyes peeled for others as well that could benefit from interacting with new internet users. 


Netflix has a large array of outside films being released that are not just for the west, we see that they are already anticipating a big revenue increase from the developing worlds. 


Price Forecast:

We think within the next 3 quarters, Netflix will move to 600-700 a share due to the realization that Starlink is legitimately connecting the globe. All FANG stocks will do well from this innovation. 

Current Price: $515

Price Target in 6 Months: $700+


Final thought on NFLX: We see this company in ARKX which is a space ETF that Cathie Woods has. We think she has recognized what Starlink will do and this is why she has Netflix in the ETF. 


Disclosure: We do not own NFLX securities/shares at the time of publication.

Square: SQ

We wanted to cover Square again for a few reasons. 

  1. Earnings report comes out August 5th 

  2. Jack Dorsey's support of cryptocurrency and Squares' role in that.

  3. Digital growth and usage increase. 

First off, Square will report their second quarter earnings August 5th after hours. They crushed their earnings in the first quarter and could do the same in this one. With the economy "reopening" it would make sense that Square would see even more action and therefore have another huge quarter. They are predicting an earnings of around $0.30 per share but SQ can easily crush that goal. Cash App is now consistently crushing it and Dorsey keeps adding to SQ network. “In the first quarter of 2021, we achieved gross profit of $964 million, up 79% year over year. Our Seller ecosystem generated gross profit of $468 million, up 32% year over year. Cash App generated gross profit of $495 million, up 171% year over year.” The economy was beginning to open up for the first quarter but it should be even more impressive in Q2.


Second, and probably most notably, Jack Dorsey announced the plans of a bitcoin wallet. “Square CEO Jack Dorsey said Friday the company is looking into building a hardware bitcoin wallet that would give consumers greater control over the cryptocurrency they own.” This was announced July 23rd and caused a small spike in value which has since then dipped back down. Dorsey keeps finding ways to add more and more value to the company and in the meantime the services SQ provides are making huge returns. The price has stayed down the past month so this could be a great opportunity to get in because square is proving to be quite promising. 


Price Forecast:

The price should continue to increase over time 

Current Price: $245.25

One Month: $255.00

One Year: $295.50

Two Years: $330.00


As we move more and more to digital payments, Square and Cash App will benefit immensely. They have huge room for growth globally as well. They have barely touched the international market and this is one thing that could continue to push the value of this company up.  “Expanding globally Strengthening our international presence remains a key priority for our Seller ecosystem, and we are focused on achieving product parity globally." This is more something to keep an eye on than a reason to purchase this stock. However, be conscious of this room for growth in this sector.  


Words of caution…. We could see a steep decline in value across the stock market as the COVID-19 Delta Variant causes a scare. Square will still be able to profit, but panic could set in. 

All stocks talked about we have invested in, and do not intend to give advice nor recommend acting upon the information.

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Until next week,


Brad Mitchell

Colby McCoy

and the Optifinancial Team

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