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In January, Netflix stock dropped 30% on slowing subscriber growth. That move was repeated in April after the company said it lost subscribers for the first time in 10 years.
But last week, the company reported subscribers had grown by 2.5 million and the stock has gained 18% since.
That means Netflix now has an enterprise value of roughly 133.3 billion dollars with 6.1 billion of cash and 13.9 billion in long term debt.
Revenue over the last 12 months was 31.4 billion dollars, net income was 5 billion and free cash flow was 717 million. That means the company is now valued at 4.2 times revenue, 25 times net income and 186 times free cash flow.
25 times earnings for Netflix is not too bad considering the company’s brand power. But slowing subscriber and revenue growth is a major concern.
A lot depends on Netflix’s plan to introduce advertising to its lowest subscription tier, which is priced at $6.99 a month and starts in November.
Morgan Stanley thinks advertising could bring in an extra 2 billion dollars of revenue a year plus another 2 billion from subscription fees. That assumes a conversion rate of 10% from existing users.
Add the 4 billion of revenue to baseline growth of 10% and Netflix revenues could hit roughly 40 billion in 2023. That would keep historical revenue growth intact at around 20% per year.
A 4 times revenue multiple on that figure would then give the company a value of 160 billion, or about 20% upside from current levels.
However, that is an optimistic scenario that assumes existing customers don’t run off to other services and that Netflix manages to keep a lid on expenses.
Creating quality content is an expensive endeavor and Netflix is still facing huge competition from the likes of Disney, Amazon, HBO and more.
Right now it’s not clear that Netlflix can maintain its impressive growth and the upside doesn’t seem big enough which is why I give the stock a neutral rating. But these are my opinions and not financial advice.
#netflixstock #investing #stocks
In January, Netflix stock dropped 30% on slowing subscriber growth. That move was repeated in April after the company said it lost subscribers for the first time in 10 years.
But last week, the company reported subscribers had grown by 2.5 million and the stock has gained 18% since.
That means Netflix now has an enterprise value of roughly 133.3 billion dollars with 6.1 billion of cash and 13.9 billion in long term debt.
Revenue over the last 12 months was 31.4 billion dollars, net income was 5 billion and free cash flow was 717 million. That means the company is now valued at 4.2 times revenue, 25 times net income and 186 times free cash flow.
25 times earnings for Netflix is not too bad considering the company’s brand power. But slowing subscriber and revenue growth is a major concern.
A lot depends on Netflix’s plan to introduce advertising to its lowest subscription tier, which is priced at $6.99 a month and starts in November.
Morgan Stanley thinks advertising could bring in an extra 2 billion dollars of revenue a year plus another 2 billion from subscription fees. That assumes a conversion rate of 10% from existing users.
Add the 4 billion of revenue to baseline growth of 10% and Netflix revenues could hit roughly 40 billion in 2023. That would keep historical revenue growth intact at around 20% per year.
A 4 times revenue multiple on that figure would then give the company a value of 160 billion, or about 20% upside from current levels.
However, that is an optimistic scenario that assumes existing customers don’t run off to other services and that Netflix manages to keep a lid on expenses.
Creating quality content is an expensive endeavor and Netflix is still facing huge competition from the likes of Disney, Amazon, HBO and more.
Right now it’s not clear that Netlflix can maintain its impressive growth and the upside doesn’t seem big enough which is why I give the stock a neutral rating. But these are my opinions and not financial advice.
#netflixstock #investing #stocks
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NewsTranscript
00:00 Should you buy Netflix stock?
00:01 In January Netflix stock dropped 30% on slowing subscriber growth.
00:05 That move was repeated in April after the company said it lost subscribers for the first
00:10 time in 10 years.
00:11 But last week the company reported subscribers had grown by 2.5 million and the stock has
00:16 gained 18% since.
00:18 A lot depends on Netflix's plan to introduce advertising to its lowest subscription tier
00:23 which is priced at $6.99 a month and starts in November.
00:27 Morgan Stanley thinks advertising could bring in an extra $2 billion of revenue a year,
00:32 plus another $2 billion from subscription fees.
00:34 However, that's an optimistic scenario that assumes existing customers don't run off
00:38 to other services.
00:40 Creating quality content is an expensive endeavour and Netflix is still facing huge competition
00:45 from the likes of Disney, Amazon, HBO and more.
00:48 Right now it's not clear that Netflix can maintain its impressive growth but these are
00:52 my opinions and not financial advice.
00:54 For more detailed investing ideas visit our website.