Bitcoin vs. Netflix: How Would You Decide?
As I write, Bitcoin has a market capitalization of $90 billion.
Netflix (NFLX) has a market capitalization of $86 billion.
So the market, in effect, is saying that these two assets are worth virtually the same.
But can this possibly be true?
I asked my analysts which asset they’d prefer to own…
The entertainment dynamo with its 100 million subscribers?
Or Bitcoin, which presently has 16.5 million “coins” in circulation?
My team’s response will likely forever alter the way you value assets.
Go With the Most Valuable Assets
Clearly there’s a big difference between owning an entire business and owning shares or coins.
The problem with owning a large asset is you can’t just sell it at the top. It requires finding a very rich “greater fool” — and they don’t grow on trees.
So I’d rather own the entity with substantial and very attractive business prospects. Which is clearly Netflix.
With Bitcoin, the only “real” asset is the blockchain technology, which is not patented. And it’s already been improved upon by several other cryptocurrencies.
Plus, Netflix can adapt its business when necessary to maintain or improve its market position over the long term.
Bitcoin offers no such assurance.
True, cryptocurrencies are enjoying an astounding upward trajectory. (Click here for the best cryptos to buy now.) But it’s not certain that Bitcoin will maintain its position against its competitors.
Crypto All the Way
Man, this is a tough one.
Netflix is a fantastic company that has completely — and profitably — disrupted the film and TV industries.
To be sure, expenses have skyrocketed as the firm licenses exclusive content. But subscriber growth keeps beating Wall Street’s most ambitious estimates.
I think this stock has got plenty of room to run as it continues to smash up the entertainment industry.
But which full entity would I rather own?
Bitcoin all day, every day.
And the reason is simple: upside.
Over the next five years, Netflix could easily double as it grows internationally.
But over the same time frame, I expect Bitcoin to triple.
You see, most of the gains for cryptocurrencies have come from retail investors and venture capitalists.
But because most governments don’t recognize cryptos as a legitimate asset class yet, institutional investors are still largely out of the game.
That could change as early as 2018.
And when — not if — that happens, the speedy inflow of capital into digital currencies will be like nothing we’ve ever seen before.
So while Netflix has assets and sustainable cash flow, as Hutch points out above, I’ll take Bitcoin over Netflix any day of the week.
As for Me and My House…
I’ll own both!
After all, there are compelling reasons to own both entities.
As my colleagues rightly pointed out, Netflix is completely disrupting the entertainment industry. Both domestically and abroad.
The latest quarterly report revealed that Netflix added another 4.45 million international subscribers. The company also pushed through price hikes in the U.S. So this isn’t a passing fad for the company’s 100 million-plus subscribers. It’s becoming a “must-have” service that’s worth a premium price.
What’s more, Netflix holds a dominant market share, with close to 50% of online video streaming in the U.S. being done over its service. The next closest competitor only boasts about 10% market share.
And the company is making the necessary investments in content to maintain its competitive advantages. Next year, Netflix is expected to spend more on content ($7–8 billion) than ESPN, Amazon, Hulu and HBO.
We can’t overlook the fact that Netflix is also a bona fide business that will eventually transition from massive capital outlays to churning massive profits. When it does, share prices promise to follow earnings higher. Bet on it!
As for Bitcoin, it’s going to benefit from increased visibility and scarcity.
As Jonathan pointed out, awareness remains limited to a small circle of investors. Once the masses come to recognize the disruptive potential, though, the founding cryptocurrency of the newest asset class on Wall Street is going to continue to surge in price. Especially since supplies are strictly limited.
Bottom line: I wouldn’t want to pick between the two. I’d own both entities. (By the way, your portfolio should have exposure to both as well. If you’re not in the crypto game yet, here’s the best way to get started.)
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily