Stock (Symbol) |
Netflix (NFLX) |
Stock Price |
$92 |
Sector |
| Technology |
Data is as of |
| January 31, 2016 |
Expected to Report |
| Apr 13 – Apr 18 |
Company Description |
 Netflix, Inc. is a provider of Internet television network. The Company has over 57 million streaming members in over 50 countries. Its members can watch more than two billion hours of television (TV) shows and movies per month, including original series, documentaries and feature films on Internet-connected screen. The Company has three operating segments: Domestic streaming, International streaming and Domestic DVD. The Domestic and International streaming segments derive revenues from monthly membership fees for services consisting of streaming content. The Domestic DVD segment derives revenues from monthly membership fees for services consisting of DVD-by-mail. Its members can play, pause and resume watching, all without commercials or commitments. Additionally, in the United States, its members can receive DVDs to their homes. The Company offers streaming service both domestically and internationally. Source: Thomson Financial |
Sharek’s Take |
| Netflix (NFLX) is set to report earnings today, and here’s a quick rundown of last qtr’s numbers. The company has 80 million subscribers now (75 million paid, 5 million on a free trail) and according to my analysis it will have 100 million subs by the end of 2016. Since the company is sacrificing profits to grow, International costs are high and revenue per subscriber is low, but let’s assume these percentages someday approach America’s like NFLX’s 2nd biggest market Canada already has. US streaming subscribers pay around $100 a year.
$10 billion, Annual Revenue In this hypothetical, if NFLX’s Intl margins could rise to those of the US, the stock is worth 40x earnings, the Fair Value would be $130 a share. But it’s not getting those margins. |
One Year Chart |
 NFLX isn’t maximizing profitability right now because its spending and promoting growth in more and more countries, thus we can’t judge the stock on EPS like other stocks as this will leave you behind if the stock goes higher. When these charts were done on January 31st the stock was $92 and was hitting support in a stock market that could have been crashing (it didn’t, but could have). Today NFLX is $109. Nice Estimated Long Term Growth Rate of 31%. |
Fair Value |
 My long-term analysis — say in many years — points to a $168 stock. The U.S. nearing saturation of 50 million subscribers and International streaming could reach 100 million subscribers so overall Netflix could have 150 million subscribers earning it $1.5 billion in revenue.
$15 billion, Revenue In 3-5 years Netflix will be more mature, and the P/E will most likely be a lot lower. 30x earnings of $4.80 is a $144 stock. 35x would be a $168 stock. |
Bottom Line |
 My calculations show Netflix would be worth $130 if International profit margins were as good as America’s. I also feel the stock could be worth $168 someday, but someday means three to five years out. That’s a long time. Still, this is one of the strongest brands in the world and is flexing its muscles by conquering overseas markets. Without EPS, this stock is tough to price, and subject to volatile moves. It’s a great growth stock, but I would get in on a dip in a diversified portfolio. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
