Netflix stock
To justify its current price, Netflix’s profits must grow to 132% of Disney’s 2019 NOPAT, as this chart shows. Netflix’s NOPAT in this scenario is over $14 billion in 2030, or over 3.5 times its 2020 NOPAT. See the math behind this reverse DCF scenario. In this scenario, Netflix’s implied revenue in 2030 of $89.4 billion is more than 3.5 times its 2020 revenue, double the combined TTM revenue of Fox Corp.Īnd ViacomCBS and 47% greater than Disney’s TTM revenue. Grow revenue 14% compounded annually for the next decade, which assumes revenue growth at consensus estimates in 2021-2023 and 13% each year thereafter five-year average of 9% and three-year average of 12%) and Maintain its record 2020 margin on net operating profit after taxes (NOPAT) of 16% (vs.
To justify Netflix’s current stock price of around $505, the company must: We use our reverse discounted cash flow (DCF) model and find that the expectations for Netflix’s future cash flows look overly optimistic given the competitive challenges above and guidance for slowing user growth. We don’t think Netflix’s money-losing mono-channel streaming business has the staying power to compete with Disney’s (and all the other video content producers’) original content spending-at least not at the level to grow subscribers and revenue at the Netflix’s valuation requires twice the combined revenue of Fox and ViacomCBS The stark contrast raises the question of how long Netflix can keep this up. Netflix burned $11.7 billion in FCF over the past five years.
NETFLIX STOCK FREE
Since the second quarter of 2019, Netflix has burned $1 billion in free cash flow while Disney generated $4.7 billion in FCF. This chart compares Netflix’s cash burn to Disney’s cash generation. Generate cash flows from other businesses that can help fund streaming platforms.Īs a result, Netflix loses money while competitors make money. Competitors such as AT&T and Comcast/NBC Universal Netflix has one revenue stream, subscriber fees, while Disney monetizes content across its theme parks, merchandise, cruises and more. The real problem: Limited ability to monetize content On top of all that, Netflix, unlike its competitors, doesn’t have any live sports offerings to keep subscribers hooked. Original content, in general, can be cheaper than licensed content, but that advantage only translates to profits if it is as least as popular, which it is not.Ĭonsequently, Netflix must continue to invest a significant amount of money in its licensed content library, such as the $500 million deal for “Seinfeld” and the more recent deal with Sony Pictures, rumored to cost $1 billion.
NETFLIX STOCK LICENSE
Netflix’s shift to original content was a bet that it could wean viewers off licensed content and forgo the costly (and ongoing) license fees.
NETFLIX STOCK SERIES
Its three most-streamed series in 2020 were licensed.Just 3% of viewed minutes was spent on Netflix-produced shows.So far, spending billions on original content may win some awards, but subscribers still like licensed content more. number of subscribers) needed to justify its lofty valuation. Here is where Netflix narrative breaks down: the content spending cuts needed to be profitable prevent Netflix from achieving the scale (i.e. So Netflix plans to spend $17 billion on new content in 2021….but will it work? The data suggests “no” and that throwing billions of dollars at content will not be enough to fend off its competition. This chart shows Netflix lost a lot of market share and gained a lot of competitors in 2020. streaming market fell from 29% in 2019 to 20% in 2020. According to a report by Ampere Analysis, a media and content analytics firm, Netflix’s share of the U.S. Netflix can claim, as management did in its earnings press release, that competition didn’t play a large role in the subscriber miss, but market share data for the streaming industry indicates otherwise. Read: Netflix’s underwhelming subscriber gains spark ‘vigorous debate’ about the future
Management guided for just one million subscriber additions in 2Q21, which puts Netflix on the lowest subscriber addition trajectory since 2013, or when Netflix began producing original content Netflix reported just under 4 million new subscribers in the first quarter, well below its previous guidance of 6 million and consensus expectations of 6.3 million. We think the stock at best is worth just $231 today – a 54% downside.