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Netflix (NASDAQ:NFLX) is the world's leading internet subscription service for enjoying TV shows and movies. Their core strategy is to grow their streaming subscription business domestically and globally. I rate Netflix as a buy for several reasons listed below.

Low stock price

The share price of Netflix was $295.14 in July 8, 2011. The current share price is $68.88, which is less than a quarter of the peak value. The EBITDA multiple for the company as of June 2012 was 11.4, implying that the company is undervalued. The share price will decline further if Netflix does not meet the Wall Street expectations. There is a high probability that Netflix will not meet the Wall Street expectations in 2013 as the company is making substantial investments. So the stock price is low and is on the brink of declining further. Hence it is advisable to go long on this stock as it bottoms out in the next few quarters.

Source: Yahoo Finance

Market position

Netflix has always been, and still is, the leader in streaming and by-mail DVD rental businesses. Netflix's top competitors Amazon (NASDAQ:AMZN), Dish Network's Blockbuster (NASDAQ:DISH) and Comcast's Xfinity Streampix (CMCSA, CMCSK) are still nowhere near in terms of content or subscriber base. Netflix provides the best subscription streaming content as well as sufficiently good video quality. Moreover the customer satisfaction rating of Netflix has been steadily improving for the last few quarters. Amazon provides streaming services as a part of Amazon prime. Even though argument can be made that Amazon has the deep pocket to buy content, Amazon has been unwilling to make streaming an independent service and increase the spending on it.

Source: WSJ

Management

Netflix management has stumbled in the past. Some of these were high profile mistakes receiving stern rebuke from both customers and investors. But the management has grown wise from its mistakes. It is focusing on the online streaming business which is growing rather than the DVD rental business that is dying. Even though the margins are lower for online streaming, sheer volume is going to compensate for lower margins. Recently Netflix CEO Reed Hastings stepped down from Microsoft's (NASDAQ:MSFT) board of directors to focus his attention on Netflix. This move has been well received by the Wall Street and is a boost to the company's strategic initiatives

Source: WSJ

Strategic Initiatives

Netflix is a pioneer in the online streaming platform. The company introduced Netflix platform on several ecosystems like the XBOX, and this was instrumental in increasing the subscription base. Netflix has started to create its own content. This strategy successfully helped HBO (NYSE:TWX) and AMC (NASDAQ:AMCX) to regain their market position. It will help Netflix not only to strengthen its market leadership but also differentiate itself from competition. Netflix recently partnered with Sumo Logic to take advantage of its cloud Log Management and Analytics platform. This will lead to better content management keeping in line with the emerging customer preferences. Netflix is expanding internationally. Though this will impact the cash flows in the short run it will lead to lower costs and higher margins in the long haul.

So, I recommend Netflix as a strong buy, but the caveat is you should be willing to remain vested for the long term.

Source: Netflix For The Long Haul