We recently compiled a list of the Jim Cramer on Taiwan Semiconductor, Netflix, and Other Stocks. In this article, we are going to take a look at where Netflix, Inc. (NASDAQ:NFLX) stands against the other stocks on Jim Cramer’s list.
Jim Cramer, the host of Mad Money, recently expressed concern that some investors are overlooking potential market opportunities by fixating on the Federal Reserve’s next moves regarding interest rates. He emphasized that, over the years, many in the investment community have become overly reliant on the Fed’s actions rather than focusing on individual companies and their profitability.
“Everyone who’s obsessed with the Fed’s next foray is basically investing with blinders on, and as a result, they’re missing out on some of the greatest moves I’ve ever seen in my life. Moves coming from the most unlikely of stocks. And I don’t want to see you ignoring these opportunities anymore.”
Cramer said that he is an admirer of Fed Chair Jay Powell, but he recognizes the limits of the Fed’s influence. He noted that while Powell wields significant power, he cannot dictate the performance of high-quality companies that are less affected by economic cycles. According to Cramer, when a company is not tied to the business cycle, it is less susceptible to the whims of the Fed. However, many traders still seem oblivious to this reality.
“… I needed to say something because over the past couple of decades, so many people in this business have become creatures of the Fed, not of companies and the profits that they make. Unless the Fed’s happy… unless it has its pound of flesh, these Fed watchers won’t pull the trigger and buy stocks, even stocks of companies have almost nothing whatsoever to do with our central bank and are doing really well.”
He highlighted that fear of the Fed often extends to stocks that appear pricey based on earnings multiples, particularly when investors worry that the Fed might have to abandon rate cuts to combat inflation. This fear, he noted, can drive investors away from promising sectors, like semiconductors. While Cramer acknowledges the importance of being aware of the Fed’s actions, he insists that it should not become an obsession. He believes that although the Fed has considerable influence, it is not all-powerful.
He clarified that he does not claim the stock market will never decline during periods of Fed easing, but he maintains that there are limits to the Fed’s impact.
“I’m not saying the stock market will never go down when the Fed’s easing… I am saying there are limits to what the Fed impacts. And I swear by the managers who know a lot about business, and who don’t cower when Jay Powell grabs the mic to talk about the pace of rate cuts.”
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 17. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A home theater with family members enjoying streaming content together.
Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 103
Jim Cramer called Netflix, Inc. (NASDAQ:NFLX) “pretty good” and said that it is one of the companies whose performance is tied to its executives’ strategies. He commented, “Tonight we got excellent numbers from Netflix. They have that advertising tier, of course, it’s working”.
On October 17, Netflix (NASDAQ:NFLX) unveiled its financial results for the third quarter, showing strong performance despite some ongoing challenges in maintaining membership growth and monetizing its ad-supported tier effectively. During this quarter, the company experienced a 15% increase in revenue compared to the same period last year, coupled with the addition of over 5 million new subscribers. The operating margin reached 29.6%, an improvement from 23% a year prior, which points to its effective cost management strategies. Additionally, net income saw a significant jump of 41%, which translated to diluted EPS of $5.40, marking a 45% increase year over year.
The revenue surge was largely fueled by new memberships in international markets, alongside the improvement of operating margins. There was a 35% quarter-on-quarter growth in the ad-supported tier’s memberships, even as Netflix (NASDAQ:NFLX) navigated some difficulties in ad monetization. The company has acknowledged these challenges and is actively investing in technology aimed at improving its advertising capabilities.
For the fourth quarter, management projects a 14.7% increase in revenue year-over-year, alongside a target operating margin of 21.6%. Additionally, projections for 2025 show expected annual revenue between $43 billion and $44 billion, driven by ongoing membership growth and increases in average revenue per subscriber.
Overall NFLX ranks 2nd on our list of the stocks Jim Cramer is talking about. While we acknowledge the potential of NFLX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NFLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
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