To The Moon

$Netflix(NFLX)$ is still the most investable company in big-technology in the next year.

Since Q3 earnings released inOctober, NFLX showed only volatilily difference against the benchmark. NFLX +4.55% while $NASDAQ 100(NDX)$+1.09% at the same time.

Its 2-year beta 1.58 much higher than 60-day beta 1.36, so it is still in control.

Netflix plunged 8.63% in Dec 15, which was the biggest decline since the April. After the plunge, Netflix still backed 51% this year, but still climbed 78% from the lowest point of $162, while the Nasdaq 100 Index only rebounded 8% from 52w low.

The most important reason is its launch of advertise businees. Last night's sharp drop was also due to this reason.

According to Digiday(Click to view)

Netflix is falling short of ad-supported viewership guarantees made to advertisers and allowing advertisers to take their money back for ads that have yet to run, according to five agency executives.

This "pay as you use" is different from the cable TV advertising, who usually collects all the advertising fee first, keeping committed ad dollars on the books and owing advertisers so-called “make-goods” — or future ad inventory — to satisfy viewership guarantees

Netflix agreed to allow refunds will be welcomed by advertisers.

Why Advertiser needs refund?

First, worrying about the decline in use of time. But according to Nielsen, Netflix's programs are still firmly at the top of the ratings list of the whole streaming media.

Second, worrying about the growing pacing below expectations. Netflix, which has just launched its advertising business,  it is probably not achieving target of 50 million advertising users.

Third, the price of Netflix advertising is higher than that of its peers, and advertisers bargain with it. Netflix's advertise CPM is $65, higher than Disney' $50. Even reduced to 55 US dollars, it is still higher than its peers. Netflix wants to set a higher price when it starts. It is a big deal to reduce the price if the effect is not good, but it is difficult to raise the price if the effect is too good.

Fourth, the insufficient demand for consumer industry. Many advertisers were suffering the insufficient demand during the Black Friday and they hope to save money for Christmas and New Year.

Netflix's reaction is mutual beneficial.

First of all, the advertising business started from scratch.The early target does not need to stand high.Lowering certain market expectations also provides room for subsequent growth.

Secondly, Netflix has Huge subs base. As long as it is not a strategic mistake, it is only a matter of time before the advertising business is expanded.

More importantly, it can also do a  "favor" to advertisers. The more friendly NFLX shows, the better cooperation in the future. By the way, it improves the initial efficiency, which attract more advertisers in the future.

To sum up,

Netflix is quite confident in its advertising business

The 8% plunge is more like a dip to buy. Though I think the market still has the lots of downward risk, Netflix's selling pressure will not end soon, by

1. Netflix's rapid rebound makes profit for short-term investors.
2. Netflix's huge loss for higher cost could sell for tax purpose.

But this also means the good time for buy the dip is coming. Also, it is the best big-tech company with new business lauching in 2023. 

Fore traders, Sell PUT may be a better choice. Sell PUT at an exercise price OTM 10% lower than the current price. Those who already hold Netflix shares can Sell Covered CALL to protect their positions and obtain certain excess returns.