What We Learned This Week

Leadership in Streaming: Netflix exceeded expectations in its 4Q23 earnings report, gaining over 13 million subscribers in the quarter, well beyond the anticipated 8-9 million. Notably, the company also raised its operating margin guidance for the year to 24%, up from the previous 22-23%, showcasing its ability to achieve profitability in a challenging streaming landscape. Netflix's sustained subscriber growth, extending beyond the expected benefit from password-sharing crackdowns, underscores the strength of its brand and customer loyalty. The company remains committed to developing organic content, distinguishing itself from competitors focused on acquisitions or linear assets. Additionally, Netflix hinted at potential future price hikes, underscoring its pricing power.

Chipotle is Hiring: Chipotle plans to hire 19,000 employees ahead of its busy spring season, a notable increase of over 25% from the previous year. To attract talent, the company is enhancing its employment offers, including a 401k match and credit-building opportunities. Despite being a consistent performer in recent years, there are signs Chipotle is facing challenges in consumer sentiment. Increasingly, customers appear to be expressing concerns about a lack of interest, subpar service, and unclean restaurants. This potential divide between Wall Street and Main Street perceptions of the brand is important to monitor given the strength of the stock in recent years.

The Tesla Debate Continues: Tesla's stock faced a turbulent start to the year amid various challenges, from price cuts to production issues, raising concerns about demand. The 4th quarter earnings report, marked by revenue growth of only 1% from the previous year, didn't alleviate these worries. The inherent challenge in gauging Tesla's value lies in navigating a debate over the relative importance of short-term metrics versus the overarching, long-term narrative. Tesla's unconventional valuation underscores investor confidence in its potential beyond conventional automaking, a sentiment prevalent among a substantial portion of the investor base. However, the existence of another faction grading the company based on its current-day performance introduces a divergence that creates volatility in the stock.

In our perspective, successfully navigating a company like Tesla hinges on evaluating the company's vision, forming your stance, and embracing a patient, long-term investment strategy, recognizing that the real impact may take a decade or more to fully materialize. Adhering to a long-term narrative over many years is one of the single most challenging aspects of investing. Countless occurrences will inevitably arise, triggering our inherent human bias toward taking action.