"Netflix has pulled back recently following its latest earnings report, even though the streaming service posted impressive top-line growth and continues to expect its full-year operating margin to expand. That move has some investors wondering whether this is a good time to buy one of the market's most closely watched growth stories. Like Netflix, Alphabet taps into similar streaming and digital video trends while leaning on digital advertising and subscription services."
"But unlike Netflix, Alphabet operates a much more diversified business, featuring Google Search, YouTube, a rapidly growing cloud platform, and even a small but important self-driving car technology business. Both companies benefit from structural shifts in how people watch video and use the internet. But their business models and valuations point in different directions for investors deciding where to put new money to work. One arguably looks like the clear winner when comparing their investment prospects head-to-head."
"Both businesses have been growing rapidly. Netflix's third-quarter revenue rose 17% year over year to about $11.5 billion. Management expects similar growth in the fourth quarter. Additionally, the company is guiding for operating margin expansion. Specifically, it expects its full-year operating margin to be around 29%, up from 27% last year. Netflix is also leaning into its small but meaningful advertising-supported plans, as the company's three-year-old ad business continues to grow quickly."
Netflix experienced a stock pullback after earnings despite posting 17% year-over-year third-quarter revenue growth to about $11.5 billion and forecasting similar fourth-quarter growth. Management expects full-year operating margin to rise to around 29% from 27%. Netflix is expanding an advertising-supported tier and anticipates ad revenue more than doubling in 2025, adding growth beyond subscriptions, but remains concentrated in subscription video and must continue funding licensed and original programming. Alphabet operates a more diversified business spanning Google Search, YouTube, cloud, advertising, subscriptions, and self-driving technology. Both benefit from shifts in video consumption and internet use, yet their models and valuations differ for investors.
Read at The Motley Fool
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