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IOL News
02-07-2025
- Business
- IOL News
Netflix's lofty valuation has even bullish investors nervous
An Appl laptop and iPhone display Netflix Inc. home screen for original series Stranger Things in an arranged photograph in Brookly, US. Image: Gabby Jones/Bloomberg Netflix investors face a dilemma: Continue to bet on a stock that has delivered best-in-class returns over the past year or reconsider shares that increasingly look like they're priced for perfection. The streaming giant's stock price has nearly doubled over the last 12 months amid growth from advertising sales, subscription price increases and limited exposure to tariffs. While that makes it one of the best performing S&P 500 members over that span, it's also boosted its valuation to 45 times expected earnings for the next year. In comparison, Nvidia Corp. is priced at 32 times while the Nasdaq 100 is at 27 times. Such a premium valuation, Netflix's highest since 2021 - when its growth was being supercharged by the pandemic - is making even bullish investors wary of a potential sell off. Second-quarter earnings are due on July 17. 'I feel really good about its fundamentals, in terms of its pricing power, ad business and move into live events, but expectations have gotten to the point that any disappointment would be a risk,' said Michael Smith, senior portfolio manager and head of growth equity at Allspring Global Investments. After tumbling in 2022 amid slumping subscriber growth, Netflix shares have roared back as the company cracked down on password sharing and turned to advertising to boost revenue. Meanwhile, live events like WWE Raw are helping attract new subscribers. Netflix is the fourth best-performing stock in the Nasdaq 100 this year and now boasts a market value of $570 billion (R10 trillion), bigger than Mastercard and Exxon Mobil. Netflix's revenue is expected to rise 14% in 2025, down from 16% growth in 2024, according to the average of analyst estimates compiled by Bloomberg. While that's a vast improvement from 2022, when revenue rose by about 6.5%, it pales in comparison to 2020 and 2021, when Netflix's sales jumped 24% and 19%, respectively, as pandemic era lockdowns sent subscriber growth soaring. Still, most analysts on Wall Street remain bullish on the stock with a slate of programming this year that includes NFL games, boxing and new seasons of the popular shows Squid Game and Stranger Things. Last month, Oppenheimer & Co. described Netflix's outlook as 'ironclad' and raised the price target on the stock, one of many to do so in June. However, the shares have risen faster than analysts have upped their projections, leaving Netflix trading roughly 10% above the average price target of $1 217, suggesting limited upside potential over the coming months. Plenty of investors are undeterred by Netflix's valuation. Ken Mahoney, the CEO of Mahoney Asset Management, acknowledges it's a steep price to pay but believes Netflix's market dominance justifies the premium. 'People often miss great companies because they worry about valuation, and I don't have a problem spending up for what Netflix offers,' Mahoney said. Netflix is 'doing all the right things and is like a snowball getting bigger as it rolls downhill.' Another factor that's helped power Netflix's rally is that the stock has become much more widely owned. According to Bank of America data published at the end of May, Netflix was owned by 49% of long-only funds, making it the ninth-most-widely-held technology stock. About 14% of such funds held the stock in early 2016.
Yahoo
16-05-2025
- Politics
- Yahoo
Governments continue losing efforts to gain backdoor access to secure communications
Reports that prominent American national security officials used a freely available encrypted messaging app, coupled with the rise of authoritarian policies around the world, have led to a surge in interest in encrypted apps like Signal and WhatsApp. These apps prevent anyone, including the government and the app companies themselves, from reading messages they intercept. The spotlight on encrypted apps is also a reminder of the complex debate pitting government interests against individual liberties. Governments desire to monitor everyday communications for law enforcement, national security and sometimes darker purposes. On the other hand, citizens and businesses claim the right to enjoy private digital discussions in today's online world. The positions governments take often are framed as a 'war on encryption' by technology policy experts and civil liberties advocates. As a cybersecurity researcher, I've followed the debate for nearly 30 years and remain convinced that this is not a fight that governments can easily win. Traditionally, strong encryption capabilities were considered military technologies crucial to national security and not available to the public. However, in 1991, computer scientist Phil Zimmermann released a new type of encryption software called Pretty Good Privacy (PGP). It was free, open-source software available on the internet that anyone could download. PGP allowed people to exchange email and files securely, accessible only to those with the shared decryption key, in ways similar to highly secured government systems. Following an investigation into Zimmermann, the U.S. government came to realize that technology develops faster than law and began to explore remedies. It also began to understand that once something is placed on the internet, neither laws nor policy can control its global availability. Fearing that terrorists or criminals might use such technology to plan attacks, arrange financing or recruit members, the Clinton administration advocated a system called the Clipper Chip, based on a concept of key escrow. The idea was to give a trusted third party access to the encryption system and the government could use that access when it demonstrated a law enforcement or national security need. Clipper was based on the idea of a 'golden key,' namely, a way for those with good intentions – intelligence services, police – to access encrypted data, while keeping people with bad intentions – criminals, terrorists – out. Clipper Chip devices never gained traction outside the U.S. government, in part because its encryption algorithm was classified and couldn't be publicly peer-reviewed. However, in the years since, governments around the world have continued to embrace the golden key concept as they grapple with the constant stream of technology developments reshaping how people access and share information. Following Edward Snowden's disclosures about global surveillance of digital communications in 2013, Google and Apple took steps to make it virtually impossible for anyone but an authorized user to access data on a smartphone. Even a court order was ineffective, much to the chagrin of law enforcement. In Apple's case, the company's approach to privacy and security was tested in 2016 when the company refused to build a mechanism to help the FBI break into an encrypted iPhone owned by a suspect in the San Bernardino terrorist attack. At its core, encryption is, fundamentally, very complicated math. And while the golden key concept continues to hold allure for governments, it is mathematically difficult to achieve with an acceptable degree of trust. And even if it was viable, implementing it in practice makes the internet less safe. Security experts agree that any backdoor access, even if hidden or controlled by a trusted entity, is vulnerable to hacking. Governments around the world continue to wrestle with the proliferation of strong encryption in messaging tools, social media and virtual private networks. For example, rather than embrace a technical golden key, a recent proposal in France would have provided the government the ability to add a hidden 'ghost' participant to any encrypted chat for surveillance purposes. However, legislators removed this from the final proposal after civil liberties and cybersecurity experts warned that such an approach would undermine basic cybersecurity practices and trust in secure systems. In 2025, the U.K. government secretly ordered Apple to add a backdoor to its encryption services worldwide. Rather than comply, Apple removed the ability for its iPhone and iCloud customers in the U.K. to use its Advanced Data Protection encryption features. In this case, Apple chose to defend its users' security in the face of government mandates, which ironically now means that users in the U.K. may be less secure. In the United States, provisions removed from the 2020 EARN IT bill would have forced companies to scan online messages and photos to guard against child exploitation by creating a golden-key-type hidden backdoor. Opponents viewed this as a stealth way of bypassing end-to-end encryption. The bill did not advance to a full vote when it was last reintroduced in the 2023-2024 legislative session. Opposing scanning for child sexual abuse material is a controversial concern when encryption is involved: Although Apple received significant public backlash over its plans to scan user devices for such material in ways that users claimed violated Apple's privacy stance, victims of child abuse have sued the company for not better protecting children. Even privacy-centric Switzerland and the European Union are exploring ways of dealing with digital surveillance and privacy in an encrypted world. Governments usually claim that weakening encryption is necessary to fight crime and protect the nation – and there is a valid concern there. However, when that argument fails to win the day, they often turn to claiming to need backdoors to protect children from exploitation. From a cybersecurity perspective, it is nearly impossible to create a backdoor to a communications product that is only accessible for certain purposes or under certain conditions. If a passageway exists, it's only a matter of time before it is exploited for nefarious purposes. In other words, creating what is essentially a software vulnerability to help the good guys will inevitably end up helping the bad guys, too. Often overlooked in this debate is that if encryption is weakened to improve surveillance for governmental purposes, it will drive criminals and terrorists further underground. Using different or homegrown technologies, they will still be able to exchange information in ways that governments can't readily access. But everyone else's digital security will be needlessly diminished. This lack of online privacy and security is especially dangerous for journalists, activists, domestic violence survivors and other at-risk communities around the world. Encryption obeys the laws of math and physics, not politics. Once invented, it can't be un-invented, even if it frustrates governments. Along those lines, if governments are struggling with strong encryption now, how will they contend with a world when everyone is using significantly more complex techniques like quantum cryptography? Governments remain in an unenviable position regarding strong encryption. Ironically, one of the countermeasures the government recommended in response to China's hacking of global telephone systems in the Salt Typhoon attacks was to use strong encryption in messaging apps such as Signal or iMessage. Reconciling that with their ongoing quest to weaken or restrict strong encryption for their own surveillance interests will be a difficult challenge to overcome. This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Richard Forno, University of Maryland, Baltimore County Read more: Are private conversations truly private? A cybersecurity expert explains how end-to-end encryption protects you Signal is not the place for top secret communications, but it might be the right choice for you – a cybersecurity expert on what to look for in a secure messaging app EU law would require Big Tech to do more to combat child sexual abuse, but a key question remains: How? Richard Forno has received research funding related to cybersecurity from the National Science Foundation (NSF), the Department of Defense (DOD), and the US Army during his academic career since 2010.
Yahoo
05-04-2025
- Business
- Yahoo
Jim Cramer Prefers Lam Research (LRCX) Over Applied Materials But Cautions About Risks
We recently published a list of . In this article, we are going to take a look at where Lam Research Corp (NASDAQ:LRCX) stands against other top stocks on Jim Cramer's radar as Trump tariffs wreak havoc across global markets. Jim Cramer in a latest program on CNBC said that President Donald Trump's new tariffs were much worse than expected. Cramer believes investors were getting 'tired' of worrying about the tariff threat and went into a 'bring it on' mode ahead of the Wednesday announcement. 'Regular viewers know that I've never been a huge fan of free trade. It would be fine if everybody plays by the rules, but we're the only country that plays by the rules. I want fair trade instead, which means tariff those who tariff us just as hard. Of course, I've been hoping for reciprocal tariffs, and that's what we allegedly got, even if they were far more severe than I'd hoped for. With reciprocal tariffs, we hammer specific countries for putting up specific trade barriers or subsidizing specific industries. While we got reciprocal tariffs, I never expected them to be this high, nor did many other people. From Wall Street's perspective, Trump might as well have used a meatax, which is what we were most afraid of. The term reciprocal meant nothing in the end; the term punitive is more accurate.' Cramer Calls China an 'Insidious Octopus' Cramer called China an 'insidious Octopus' and mentioned how the country used several 'loopholes' to enter the US and European markets. However, he believes the tariffs will result in higher prices for consumers. Cramer said Trump does not 'care' about falling stock prices or rising consumer prices. 'Trump doesn't seem to care about the stock market this time around. Why should he care about certainty, which I've said over and over again is what makes investors happy? He's not trying to make investors happy. He's not about happiness for us. He's about making these countries bend to his will, and if it causes inflation, then it causes inflation. He never promised you a rose garden stock market, and I sure didn't see one in the Rose Garden today.' READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In For this article, we picked 10 stocks Jim Cramer recently talked about during his programs on CNBC. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here). A technician operating an automated semiconductor processing machine with laser accuracy. Number of Hedge Fund Investors: 58 Jim Cramer in a latest program on CNBC said that he prefers Lam Research Corp (NASDAQ:LRCX) over Applied Materials. 'All right, Applied Materials is number three. After, I like Lam Research, and then I like KLA, and then I like Applied Materials. They have a lot of China exposure that makes people very, very worried. I think Tim Archer from Lam is a better one if you want to be in capital equipment, but I've got to tell you, capital equipment is so tied up with China that I can't just get behind it anymore, even though I love these companies. We've got to straighten things out with China.' Columbia Seligman Global Technology Fund stated the following regarding Lam Research Corporation (NASDAQ:LRCX) in its Q4 2024 investor letter: 'Lam Research Corporation (NASDAQ:LRCX) was a disappointing position for the fund during the quarter, despite strong long-term returns for the company stock. Escalating tensions between the United States and China have impacted Lam's returns as U.S. restrictions on high-technology exports to China, particularly advanced AI chips, have been a major negative for chip providers. The company was impacted by the U.S. election and a victory for former president Trump raised concerns around potential tariffs for semiconductor manufacturing equipment during his next term.' Overall, LRCX ranks 4th on our list of top stocks on Jim Cramer's radar as Trump tariffs wreak havoc across global markets. While we acknowledge the potential of LRCX, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than LRCX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey.
