NFLX  Netflix Inc.

Exchange

NASDAQ

Sector

Consumer Services

Industry

Consumer Electronics/Video Chains

Market Cap.

83.96B

Vuru Grade

21.78/100

Current Price

$194.16
-0.97 (-0.50%)

Stability Price

$4.20
Overvalued by 97.83%

Company Metrics

  • P/E 193.97
  • P/S 7.75
  • P/B 25.36
  • EPS 0.82
  • Cash ROIC -10.21%
  • Cash Ratio 0.38
  • Dividend 0 / 0%
  • Avg. Vol. 7.13M
  • Shares 432.43M
  • Market Cap. 83.96B

Company Description

Netflix, Inc. provides online movie rental subscription services in the United States. The company offers its subscribers access to a library of movie, television, and other filmed entertainment titles on digital versatile disc (DVD). Its members can get DVDs delivered to their homes and can instantly watch movies and TV episodes streamed to their TVs and PCs. As of December 31, 2009, Netflix serv... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

3 Worrying Netflix Trends
Seeking Alpha - 19 hours ago
Netflix's catalogue continues to shrink, down about 50% since 2012, as content providers move to competitors, or create their own services.
Opinion: Is the next move for highflying Netflix stock off a cliff? - MarketWatch
4 Key Quotes From Netflix Inc.'s Third-Quarter Earnings Call
Motley Fool - Oct 17, 2017
With higher-than-expected subscriber and revenue growth in its third quarter, Netflix (NASDAQ:NFLX) shareholders have some new reasons to be happy with the company's strong growth story.
Netflix Tops Subscriber Outlook as Spending Nears $8 Billion - Bloomberg
How Much Higher Can Netflix, Inc. Realistically Go? - Investorplace.com (blog)
What Netflix's 'Binge-Racing' Data Means To The TV Industry
Seeking Alpha - Oct 20, 2017
This week Netflix released data on “binge-racing,” showing which programs its subscribers watched the fastest across the globe.
The Retreat in Netflix, Inc. Stock Is a Ruse. Buy it!
Investorplace.com - 20 hours ago
Despite a long and exciting history of earnings-related fireworks for Netflix, Inc. (NASDAQ:NFLX), this quarter's release was a snoozer.
The Case for and Against Netflix, Inc. (NFLX) - StockNewsJournal
Netflix, Inc. (NFLX) Price Target Raised to $235.00 - Dispatch Tribunal
Netflix Touts Exclusive Content - Entertainment Hub Or A Content Creator?
Seeking Alpha - Oct 18, 2017
Netflix (NFLX) posted stellar subscriber growth during the third quarter of 2017. The company added 5.3 million subscribers globally, fueled by an addition of 4.45 million international subscribers.
Netflix to Be Tracked by Nielsen, Aiding Studios' Fee Talks - Bloomberg
Nielsen shares gain more than 4% after company announces new Netflix ratings ... - MarketWatch
Netflix Inc. Earnings: 3 Things to Watch
Motley Fool - Oct 14, 2017
Netflix has seen subscriber additions increase dramatically over the past six months, notching 10.2 million new users in the first half of 2017, 21% more than the additions in the first half of 2016.
Wall Street raises targets on Netflix, citing price increases - Reuters
Goldman Gone Crazy? Boosts 12-Month Netflix Target By 17.5% - Seeking Alpha
6 Key Metrics From Netflix Inc.'s Earnings Report
Motley Fool - Oct 19, 2017
There may be room for many winners in the shift away from broadcast television, but right now most of the gains are flowing directly into Netflix's (NASDAQ:NFLX) coffers. The leading subscription streaming service this week beat its own aggressive ...
How to Make Money By Trading Netflix's Knockout Quarter - TheStreet.com
Netflix, Inc. Stock May One Day Hang On Viewership Measurements
ValueWalk - 17 hours ago
Even names like Disney are starting to catch a whiff of something that smells like cable TV, if the end of its deal with Netflix is any indication. Disney doesn't typically run its movies or on competing cable TV networks and instead reserves them for ...
What to Expect When Netflix, Inc. Reports Q3 Results
Motley Fool - Oct 12, 2017
Netflix (NASDAQ:NFLX) is preparing to report its third-quarter results on Monday night. The company has been in the news a lot lately, breaking ties with Walt Disney (NYSE:DIS) and raising service prices, so this report should be interesting -- to say ...
Why the Netflix, Inc. (NFLX) Price Hike Won't Matter in the Long Run - Investorplace.com
Netflix Inc: Can Earnings Propel Netflix Stock Even Higher? - Amigobulls
Netflix is raising the price of its most popular US plan by 10%
Los Angeles Times - Oct 5, 2017
Netflix Inc. is raising the price for its most popular U.S. video streaming plan by 10% - a move aimed at bringing in more money to outbid HBO, Amazon and other rivals for addictive shows.
Did Netflix choose the perfect time for a price increase? - MarketWatch
Netflix Increases Price 10% for Its Most Popular US Plan - Bloomberg
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for NFLX to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate NFLX's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$194.16 Current Price

$-17.34 Growth Price (DCF)

Why is this negative?


Show Free Cash Flow numbers

$4.20 Stability Price (EPV)

Overvalued by 97.83%


Discount Rate: 15.0%

$109.07 Book Price

Overvalued by 43.83%


Very Poor Cash Return on Invested Capital over the past 5 years

NFLX has failed to generate positive returns on its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

NFLX has lost $10.21 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20122013201420152016
Free Cash Flow -66.97M -22.24M -128.03M -840.69M -1.58B
divided by
Invested Capital 1.54B 2.06B 2.79B 4.36B 7.27B
Cash ROIC -4.34% -1.08% -4.60% -19.27% -21.77%

Poor Return on Equity over the past 5 years

NFLX has shown an inability to deliver strong results for shareholders. This could be due to poor management, NFLX operating in a highly competitive industry, or having a weak business in general.

NFLX has only generated $7.52 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20122013201420152016
Net Income 17.15M 112.40M 266.80M 122.64M 186.68M
divided by
Stockholders' Equity 744.67M 1.33B 1.86B 2.22B 2.68B
Return on Equity 2.30% 8.43% 14.36% 5.52% 6.97%

Mediocre Business Performance over the past 10 years

NFLX isn't a strong business and might be consistently attempting to fuel growth with debt or has trouble staying profitable. The lack of predictability in free cash flow should be concerning for the reliability of future earnings.

NFLX has been unable to consistently create value for shareholders.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Free Cash Flow 247.02M 76.34M 279.13M 242.56M 182.88M -66.97M -22.24M -128.03M -840.69M -1.58B

Weak Balance Sheet

NFLX's financial position is not ideal. The key is to check whether NFLX is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Cash 385.14M 297.27M 320.24M 350.39M 797.81M 748.08M 1.20B 1.61B 2.31B 1.73B
Current Assets 416.53M 361.45M 411.01M 640.97M 1.83B 2.24B 3.06B 3.94B 5.43B 5.72B
Total Assets 647.02M 617.95M 679.73M 982.07M 3.07B 3.97B 5.41B 7.06B 10.20B 13.59B
Current Liabilities 212.58M 216.02M 226.37M 388.58M 1.23B 1.68B 2.15B 2.66B 3.53B 4.59B
Total Liabilities 216.27M 270.79M 480.59M 691.90M 2.43B 3.22B 4.08B 5.20B 7.98B 10.91B
Stockholder' Equity 430.75M 347.16M 199.14M 290.16M 642.81M 744.67M 1.33B 1.86B 2.22B 2.68B
Current Ratio 1.96 1.67 1.82 1.65 1.49 1.34 1.42 1.48 1.54 1.25
TL-to-TA 0.33 0.44 0.71 0.70 0.79 0.81 0.75 0.74 0.78 0.80

Consistent Reinvestment of Profits over the past 10 years

NFLX has consistently retained profits. This may put NFLX in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, NFLX can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Retained Earnings 26.36M 108.45M 198.82M 237.74M 422.93M 440.08M 552.49M 819.28M 941.93M 1.13B
Retained Earnings Growth - 311.38% 83.32% 19.58% 77.90% 4.06% 25.54% 48.29% 14.97% 19.82%

Highly Competitive Industry over the past 10 years

It's likely that NFLX is in an industry with low barriers to entry, spurring high competition. If Gross Margins are at least satisfactory, it's likely NFLX invests heavily in R&D and Sales, General & Administrative expenses.

Only $4.49 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Net Income 66.95M 83.03M 115.86M 160.85M 226.13M 17.15M 112.40M 266.80M 122.64M 186.68M
divided by
Revenue 1.21B 1.36B 1.67B 2.16B 3.20B 3.61B 4.37B 5.50B 6.78B 8.83B
Net Profit Margin 5.55% 6.08% 6.94% 7.44% 7.06% 0.48% 2.57% 4.85% 1.81% 2.11%

Inconsistent Gross Profit Margins over the past 10 years

NFLX has good gross profit margins, however inconsistency of these margins is a cause for concern. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$38.52 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Gross Profit 419.17M 454.43M 591.00M 805.27M 2.95B 983.42M 1.29B 1.75B 2.19B 2.80B
divided by
Revenue 1.21B 1.36B 1.67B 2.16B 3.20B 3.61B 4.37B 5.50B 6.78B 8.83B
Gross Margin 34.78% 33.30% 35.38% 37.24% 91.92% 27.25% 29.52% 31.83% 32.27% 31.72%

High Capital Intensity over the past 10 years

NFLX spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

125.36% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Capital Expenditure 44.81M 207.70M 45.93M 33.84M 134.84M 89.73M 120.07M 144.52M 91.25M 107.65M
divided by
Net Income 66.95M 83.03M 115.86M 160.85M 226.13M 17.15M 112.40M 266.80M 122.64M 186.68M
Capital Expenditure Ratio 66.92% 250.16% 39.64% 21.04% 59.63% 523.16% 106.82% 54.17% 74.40% 57.67%

No Dividend History over the past 10 years

NFLX has never distributed dividends or has recently suspended their dividend distribution.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Dividend Paid - - - - - - - - - -
divided by
Shares Outstanding 68.90M 62.84M 58.42M 54.30M 54.37M 58.90M 60.76M 61.70M 436.46M 438.65M
Dividend Paid Per Share - - - - - - - - - -
Price at Year End 26.93 28.66 55.63 179.80 69.29 89.33 366.99 343.16 116.71 123.80
Dividend Yield - - - - - - - - - -

History of Stock Buybacks over the past 10 years

NFLX has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2007200820092010201120122013201420152016
Shares Outstanding 68.90M 62.84M 58.42M 54.30M 54.37M 58.90M 60.76M 61.70M 436.46M 438.65M
Stock Bought Back - 9.65% 7.57% 7.57% -0.12% -7.70% -3.06% -1.52% -85.86% -0.50%
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Discussion
Sort By:
8
Posted by rsarda1  (on March 21, 2012)
I think NFLX is slowly passing away. Having very little of the new release inventory, and growing competition from "pay as you go" - VUDU, AMAZON and Dish network's BLOCKBUSTER, Red Box kiosks, and the build in rental services on the Xbox and PS3 - not to mention channels on line like HD HBO, Cinemax, etc....

Maybe DVD rental work in India or China, or the rest of the world, but in USA, with increase of cheap bandwidth streaming is the name of the game. And all of the above services offer much better selection of more recent titles.

NFLX is out of the league of all other companies because it dose not have the capital (not tens of millions, but hundred of millions) of dollars to secure distribution right of the content. That is why they needed to increase their pricing scheme. In other words their competitive moat has been penetrated from several directions, by several attackers.

Note: APPL is about to enter that moat with new content acquisition and its new APPL TV. Did I mention how many Billions APPL has? Fair well NFLX, was fun while it lasted....
1
Posted by Yoseph  (on March 21, 2012)
The biggest thing that really bothers me about Netflix is the mismanagement around stock buybacks. In 2010 and 2011, they spent around $400 million on stock buybacks while the stock was at stratospheric levels. Management was playing the game to bump up stock prices and line their pockets.

It's put them in a terrible position now that, as you said, competition is coming from everywhere and content costs are increasing substantially.
5
Posted by ValueDave  (on March 18, 2012)
Increasing costs. Increasing competition. Increasing risk. This for some reason is resulting in an increasing stock price. It’s crazy.
5
Posted by dgreene  (on March 19, 2012)
Agreed. THey lost the Starz deal, are spending $500 million this year on “original content”, Wal-Mart and Amazon are flanking them left and right, they’re expecting a loss this year and margins are getting squeezed because content is getting more expensive. I’d short this thing if I didn’t think I’d get screwed by speculators.
4
Posted by formerhedgie  (on March 19, 2012)
Look at the Revenue growth. People are underestimating management. They’re going to take this thing much higher. They just launched in the UK and will continue to grow internationally.
3
Posted by bojangle  (on October 3, 2013)
This stock is just going up on hype. Given the new investments into the company over the past year, there was marginal growth in revenue and income. The company has potential, but the rise has been way too quick and the price is WAY too high to be worth it right now. I'd buy it around $50, not a dollar higher.
3
Posted by grafxone  (on March 27, 2012)
An impending concern is bandwidth caps. Physical media is dead, and 30% of internet bandwidth is being taken up from Netflix. Comcast is a provider who currently has monthly bandwidth/data transfer caps. What happens when they stick it to NFLX and lower the cap, and say, "ALL movies from OUR onDemand service, will not count against your cap"? Phase 1 of 2... Done...

Comcast Movies don't count against you...
http://gizmodo.com/5896560/comcast-says-its-xbox-tv-streaming-doesnt-have-to-play-by-its-own-rules

(Amazon currently does this with their Music service.)

Are bandwidth tiers/plans next, like smartphones? Just one other obstacle to think about besides the obvious AMZN and AAPL competition.

I am still waiting for Apple to acquire.

1
Posted by Scudy  (on January 20, 2013)
Personally, I doubt any company will be acquiring Netflix. It's now 2013, Netflix is steamrolling through original content in a spearheaded manner, unlike CBS, FOX, and ABC's approaches in vomiting on the wall, and seeing what sticks. As of now, the competitors Netflix faces haven't been nearly as aggressive in their endeavors, thus Netflix has just reinforced its dominance by expanding into multiple countries around the world.