Of course it may not play out that way. However while the consensus is that Netflix will conquer all, I think there's an attractive asymmetry in the risk vs reward.
That has to be the understatement of the year.
On a last-twelve-month basis, NFLX is trading at an EV/GP of 21.9x; for SKT, the corresponding multiple is merely 1.7x. If I had to buy one and sell the other, with a three-year time horizon, I’d know which way to go.
The main point for me is that, despite being a declining (and possibly terminal) business, SKT have enough residual cash-generating power to repay their whole debt and produce some surplus capital on top.
That surplus capital may not be much in absolute terms, but its PV is likely to comfortably exceed the value the market is ascribing to the equity right now.
And that is enough, for a buyer at today’s price, to extract an above-average return under a sufficiently wide range of scenarios.
Of course it may not play out that way. However while the...
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