Hi WSO,
I've recently been in talks with an Asset Manager who has brought me in numerous times to help me get a better idea of what the day-to-day is like. I reached out to a school alumni that works there (Portfolio Manager) and have written him a few research reports. I wanted to get some opinions from the people of WSO to give me some more opinions on this report and other areas that I should focus more on. I have multiple reports just like the one attached and I'm currently drafting more of these throughout all industries so when it comes time to apply I have more than just my resume and word. I also just signed up for CFA level 1 (June 2019).
If any of you have dealt with hiring juniors what do you think I should focus the next month on, CFA studying or modeling (I know basic MATLAB and I'm fairly familiar with excel)?
Attached is a NFLX research report/thesis.
Thank you and enjoy the weekend!
Free Investment Thesis Template
See if you're ready for the real deal. Video solution + modeling file included so you can get realistic practice. Just enter your email in the field below.
| Attachment | Size |
|---|---|
| nflx_report_1.pdf 631.99 KB | 631.99 KB |
I didnt even bother reading the information because your formatting is awful. You have graphs before the table of contents... your table of contents is on the same page as your actual information... smh
...
To add additional pointers:
-Some of your headings have a colon after them, i.e. "Catalysts:" while others do not. Also, some of your paragraphs do not begin with an indent, while others do. Consistency and attention to detail are KEY, and you're not demonstrating those qualities with this pitch.
-Stock prices change every second of every day. So for you to just list "Price" is nonsense. You need a specific date.
-You just say really stupid and unnecessary things, i.e. "Piggybacking off of the above."
-Your grammar is terrible, i.e. "Piggybacking off of the above there is..." you need a comma after the word "above."
-Nobody can read those two graphs on the first page. We can all see the graph itself, but in terms of the axes and labels, not a chance.
-Your data is unclear... how many people were surveyed in the two graphs (bar and Venn Diagram)? Is that a representative sample?
-You seriously need to revise. "Disney proposed merger..." should be "Disney proposed A merger"
-I'm not trying to be rude here; these are genuine errors in your report that you need to fix if you want any chance of beating the next guy.
All that for a “hold.” What a waste of time for anyone
I couldn’t agree with you more. I was told to do this stock and this is what I concluded. I thought that the price would decrease in the short term due to competition and the amount of debt they’re on boarding aka you could buy in later on for a better entry price. Although, I do think that once they’re done burning cash and have this “stockpile” of content their stock will increase, significantly.
how did you sign up for cfa level 1? I thought you had to be classified as a senior when you sign up
I’m 6 months out of undergrad and I have a job. Just go to cfainstitute.com and look
oh shit when you said hiring juniors i thought you meant that you were a junior
regardless of formatting, your analysis is missing the number one reason why people believe in netflix: the path to positive FCF and the ability to self fund. have you considered their debt load and dove into when that matures? have you considered the potential rising interest costs given the FFR trajectory?
I'm not expecting a college kid to be aware of those things, but it drives home this point: startups and companies like NFLX with negative cash flow should always be evaluated on the metrics of growth in the context of free cash flow. ultimately, what investing entails is giving cash today for more cash in the future, and if you don't prove a path to free cash flow, it's not a good stock. I'd talk about what they could do to reduce costs, potential pricing power (if they have any), maybe how they've reduced debt over the years, (I've not looked), and so on, because everyone knows what netflix is, but long term hype isn't what matters, it's earnings and cash flow
I appreciate the response. The points you mentioned should’ve been included because Netflix is in a serious cash burn stage right now. Also, if there debt is variable the market climate could destroy them. In regards to your comment about reducing costs. They are definitely trying to do this by creating a database of content for the future (Netflix originals). Renting equipment to create all this content will be cheaper in bulk compared to filming sporadically. I mentioned this, but didn’t go deep enough (could’ve included debt maturity vs how long will this content last them?). Your response definitely broadened my view on what makes a stock good. I definitely got caught up on stuff that matters, but not as much as the financials of a company. Shaping the path to FCF is definitely something I will do/include moving forward.
I truly do appreciate this. Thank you for taking the time to drop your two cents, it will definitely help me with the next one/the revised version of this.
They def have a.) pricing power and could b.) start placing ads on like their home page (xshow sponsored by xcompany) without actually having ads during viewing and generate $$$ pretty quickly. I think the cash burn that's always bandied about by NFLX bears is overstated, the company can generate revenue in interesting ways. That said, I believe in NFLX long-term but idk if I'd invest right now.
The ads would be a good source of revenue for them, but it may turn some people off. I think the stock is overvalued and will be cheaper in the future, which is why I rated it a hold. When I talked through the report I explained why I think it wasn’t a good entry point at that time given the climate of the streaming industry and the stage the company is currently in.
I appreciate the insight, time and your thoughts. Can elaborate on the pricing power? I feel it would be hard to exceed 10/month for a streaming service. Would love to here your thoughts on this.
As a general rule, you shouldn’t pitch a stock as a hold when trying to get a job, even if the stock was assigned to you. A stock pitch for recruiting purposes is different than in the real world in that the primary goal isn’t to be right but rather to show that you can make a differentiated call with well-reasoned supporting evidence.
I do believe that Netflix will miss there subscription benchmark again, but this will make for a great opportunity to buy the stock at a discount.
You seriously need to work on your writing. Your analysis can be 100% sound but if you can't convince PMs of your viewpoint via well articulated reasoning then it's pointless.
I agree. This report may or may not have been the final version, but nonetheless it needs some work reading though it regardless of the formatting issues. Thanks
The general language is very fanboy and ultimately, I could tell you're a younger person trying to get a job you're not really prepared to step in and do immediately.
Descriptions like "insane" make me cringe because 20 yr old me would have written that and present day me would bitch-slap that person for thinking it's okay. Go through and scrub it all down. Remember your audience. Don't put "insane", tell me how much vs. peers, or tech companies, something else. There's almost no comparative analysis that I saw. While we're on the subject of the audience, I agree 100% with @Vandelay Industries, you don't pitch a "Hold" for a stock when providing research for a job. The format is crap. Additionally, don't use so much first person. Like no first person is ideal. "I do believe..." in the executive summary... yuck.
You have to make your recommendation and the important points stand out. There is no bolding, callout boxes, different colors, etc. If something sucks, put it in red. If something is better, put it in green. If it's important bold. **The person reading it should be able to flip through in less than 30 seconds and get in front of a client with a 1) story, 2) important stats, and 3) a recommendation. ** There's a ton of fluff.. "The bad is just as easily seen compared to the good." WTF is that sentence in there for? Nobody gives a shit about the company itself. Give me the facts that make it a good buy or sell, if it doesn't contribute to that, scratch it.
Finally - please don't cite other analysts in your report. "Analysts have predicted that Netflix’s EPS will rise 62-100% in the coming year"... Who gives a shit?... Why am I going to hire you if you're telling me what other analysts think. What you provide should be groundbreaking perspective. **Wall Street analyst consensuses are always closer to each other than they are to the actual outcome. ** If you're not giving me something different, you provide ZERO value.
Hope this is helpful. Best of Luck!
Could you send me or write-up an ideal format for a pitch? I asked this forum a few months back for one and I was told to include what was in this report.
Thanks for the advice too. Every last bit of criticism will make me and these reports better.
For formatting examples, check out some of the pitches featured in the Graham and Doddsville series. Take out all the fluffs and try to fit everything in under two pages.
No offense but for being 6 months out of undergrad this is kind of rough. I am not trying to be a downer, but the format needs a lot of work and the idea is somewhat lazy IMO. A bigger question I have is how are you even adding any value as an analyst by pitching a company like Netflix? Every analyst and their grandma can tell you about Netflix. Maybe try to look for a less covered company that the PM might actually consider investing in?
Non nobis velit necessitatibus omnis natus quaerat. Cum provident inventore consequuntur eaque eius culpa perspiciatis. Voluptate nihil quas ab.
Vel quia veritatis fuga aut amet accusantium praesentium. Eaque qui aliquam laboriosam sed qui magnam est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ratione dolore accusantium aut nam. Veniam cum quam numquam velit architecto commodi. Dolorum eos cumque hic fugit id est sint.
Est molestiae iste debitis porro sed. Perferendis dolore ratione fugiat ea quia saepe. Eum dolorum voluptatem hic odit facilis quia facere.