Stock (Symbol) |
Netflix (NFLX) |
Stock Price |
$142 |
Sector |
| Technology |
Data is as of |
| January 30, 2017 |
Expected to Report |
| Apr 17 – 21 |
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) has 98 million subscribers now, and could hit 200 million subs in five years. But the big question is how much can NFLX make and where might the stock be in five years? NFLX grew its revenue a solid 30% in 2016 as it grew its International subscribers 48%. Wow! Here’s a breakdown of memberships from 2014, 2015 and 2016:
Domestic Streaming: 39Mil, 45Mil, 49Mil With subs growing so fast, the company could have 120 million subscribers at the end of 2017, and perhaps 200 million subs in five years. Right now NFLX is spending to grow overseas, so the company is losing money Internationally (which is fine) and thus we have to do the math to see what NFLX is capable of making. The company makes $117 a year for Domestic Streaming (up from $102 last year), $92 for Intl Streaming and $125 for Domestic DVD. I feel Intl subscription prices and margins will someday rise to that of the U.S, and in the example below use a hypothetical $120 per year subscription price on 200 million subs. $24 billion, Annual Revenue Five years from now I expect NFLX to have a normal P/E of between 30 and 40. A 35 P/E x $7.77 in profits would equate to a $272 stock price. |
One Year Chart |
 Last qtr NFLX grew sales 36% as profits came in at $0.15 vs. $0.10 = 50% and beat the $0.13 analysts’ estimate. Note these are little numbers. A dime, fifteen cents. Here’s profit estimates for the next 4 qtrs:
$0.37 vs $0.06 = 517% So 2017 could be a new era of profitability for the company, and since NFLX has beaten the street the last 4 qtrs, it could have triple-digit growth for the next year. Top-tier growth stocks have triple-digit growth. The Est. LTG of 80% is exceptional. |
Fair Value |
 Putting a P/E on this stock is a tough task. Right now I have my Fair Value P/E at 100. That gives us a $111 Fair Value for this year and $204 for next year. The stock has jumped from $100 to $142 since last Fall, perhaps because it’s trying to make its way to $200? |
Bottom Line |
 Netflix is a great stock, but its highly volatile so I think it’s better to take a long-term view then buy-and-hold the stock because the stock often gyrates after earnings when pundits nit-pick the prior qtr’s subscriber growth. In the end this is one of the world’s top franchises and it has the ability to raise prices when it wants, but right now isn’t a good time go get in as the stock is up 50% since last Fall. NFLX ranks 19th of 33 stocks in the Growth Portfolio Power Rankings. I missed the run in the Aggressive Growth Portfolio because I had a lot of tech in there now and didn’t want too much. |
Power Rankings |
Growth Stock Portfolio
19 of 33Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
