Jim Cramer on Netflix: "They Know What People Want"

Netflix, Inc. (NASDAQ:NFLX) is one of the stocks Jim Cramer offered insights on. When a caller asked about the stock during the episode, Cramer said:

“Yeah, I like Netflix a plenty. I think that Netflix understands exactly how to make a movie, how to make shows. They know what people want, and you know what they really have? It’s a subscription business. It’s, and I like, like Costco, I like, like Spotify, subscription businesses, they’re for me.”

Netflix, Inc. (NASDAQ:NFLX) provides streaming entertainment, including TV series, films, documentaries, and games. During the October 22 episode, Cramer noted that the company’s “profitability keeps improving,” as he commented:

“I think this sell-off is an overreaction… However, I will say that it’s become harder to judge Netflix ever since the company stopped… the regular reporting of subscriber metrics and average revenue per user… Again, though, I think this often, Netflix is giving you a terrific buying opportunity because I’m not worried about their business at all. I trust management when they say the Brazilian tax issue won’t impact earnings going forward, and other than that tax charge, well, you know what? I saw a lot to like…

Now, apart from the numbers themselves, I think the whole Netflix narrative remains extremely compelling… Long story short, while Netflix certainly didn’t report a clean quarter, the biggest piece of hair on this thing was that major Brazilian tax charge, one-off. I think it’s crazy that the stock sold off 10% today, given that it was already down about a hundred bucks from its highs. Plus, after the sell-off, Netflix now trades at less than 35 times next year’s earnings estimates even though it’s expected to deliver 26% earnings growth. This thing could sell at 50 times earnings, it wouldn’t be all that expensive. I think it’s a fine price to pay.

Bottom line: As far as I’m concerned, Netflix has great revenue growth and aside from that Brazilian thing, its profitability keeps improving. They had a terrific content slate. Basically, nothing about this quarter makes me doubt the company. The only thing that’s changed is the stock’s gotten a heck of a lot cheaper, which is why I think this is an incredible buying opportunity.”

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Disclosure: None. This article is originally published at Insider Monkey.