Netflix (NFLX)

New Scenario
Request Scenario
Sankey Grid
Subscribe to Updates
Component
% of STOCK PRICE
Select a component to explore
 
Top Drivers for Period
Key Drivers

Notifications

WHAT HAS CHANGED?

  1. Q1 2021 Earnings
Netflix's global paid subscribers missed expectations by about 2.2 million. Global paid net subscriber additions for the first quarter were 3.98 million vs 6.2 million expected. Lower subscriber addition was driven by rising competition in the streaming space along with the coronavirus pandemic making Netflix postpone some of its big ticket content. Despite missing subscriber growth numbers, Netflix managed to beat market expectations for revenue and earnings. Total revenue came in at $7.2 billion vs $7.1 billion expected, while EPS was $3.75 vs expectation of $2.97. Netflix's board approved a $5 billion stock repurchase program beginning in 2021.

  1. Latest Annual (FY2020) Earnings
Netflix stock rallied 12% after the company reported better than expected Q4 and FY 2020 results. The streaming giant added 8.51 million new subscribers in Q4 2020, much higher than its own forecast and analysts’ expectations of 6.06 million. For the full year it added 36.6 million subscribers, surpassing its previous record of 28.6 million in 2018. It passed the 200 million subscriber milestone for the first time. Revenue for the full year 2020 increased 24% y-o-y to $25 billion while earnings increased 47% mainly due to lower marketing expenditure. NFLX more than doubled its operating income (on y-o-y basis) in Q4’20, due to higher revenues and lower marketing expenditure. Along with much better operating metrics, two important highlights drove the rally in the stock. Firstly, NFLX said it will stop relying on more debt to fuel its growth, instead its cash balance of $8.2 billion and undrawn credit lines will be used for future growth. Secondly, the management said it is considering share buybacks (something NFLX has not done in a decade), a move that will increase earnings per share in the future.

  1. Effect of Coronavirus
The global spread of coronavirus led to lockdown in various cities across the globe, which affected industrial and economic activity. The shutdowns in major cities across the globe led to people sitting at home. Home confinement led to to higher demand for streaming services and home entertainment options. This was reflected in the sharp rise in Netflix’s subscriber count during 2020, with more people streaming content. However, Netflix faces strong competition from established players like Amazon and new entrants like Disney+. Netflix managed to surprise the markets with net paid subscriber additions of 26 million in the first half of 2020, double market expectations. For the full year it added 36.6 million, breaking its previous record of FY2018. This has helped the stock rise more than 60% from $325 at the beginning of 2020 to $533 at the end of January 2021. With the company missing subscriber additions in Q1 2021, the stock has fallen to $510 as on 22nd April 2021.

  1. Netflix's international growth

Netflix’s international growth has been solid so far, as the company has rolled out its service to a number of markets. Netflix has been targeting the Asia-Pacific in a big way, and the market holds a lot of promise for Netflix. We believe that Netflix will experience healthy adoption rates in the newly launched countries on the strength of its original content and its competitive pricing. Netflix’s international subscriber base has grown from 1.9 million customers in 2011, to nearly 140 million by the end of 2020. Taking a long-term perspective, we believe that Netflix can come close to 300 million international subscribers by the end of our forecast period.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Netflix's value that present opportunities for upside or downside to the current Trefis price estimate for Netflix:

Netflix's U.S. Streaming Subscribers: Currently we forecast Netflix's U.S. streaming subscriber base to increase from around 70 million in 2020 to more than 85 million by end of our forecast period. There could be more than 10% downside to our price estimate if this figure remains below 70 million instead. This could happen if the market growth for streaming slows down, and competition weighs heavy in the future. On the other hand, there could be around 10% upside to our price estimate if Netflix blows past expectations, and captures well over 100 million U.S. subscribers.

Domestic Streaming Contribution Margin: Currently we forecast this figure to rise from about 41.3% in 2019, to close to 50% by the end of our forecast period. However, there could be a downside of about 10% to our price estimate if the margin was to decline to 30%. On the other hand, there could be upside of about 10% if this figure was to increase to over 60% instead.

For additional details, select a driver above or select a division from the interactive Trefis split for Netflix at the top of the page.

BUSINESS SUMMARY

Netflix offers video rental service in the form of DVDs, as well as online streaming to U.S. customers. The company also offers streaming services in international markets and is currently available in about 190 countries.

Netflix's content is available for streaming through a variety of devices such as PCs, Macs, video game consoles, tablets, and smartphones. The company is consistently working toward striking more content deals in order to improve its online library.

In the case of DVDs, Netflix's customers can choose the videos they want to rent from an online library available on the company's website. Unlike traditional video rental businesses, such as Blockbuster and Redbox, Netflix does not have any store locations and instead delivers DVDs through the postal mail.

SOURCES OF VALUE

The majority of Netflix's value is currently hinged on its U.S. Streaming services for the following reasons:

Firstly, the DVD subscribers are expected to decline significantly in the U.S., while streaming subscribers are expected to grow. The home video market is growing in the U.S. and streaming is the best way to tap into it given the proliferation of multiple internet-enabled devices. Netflix has seen rapid adoption of its streaming plans in the U.S. Although the competition is intensifying, Netflix remains a leader in the streaming segment.

Secondly, the international streaming business is currently a relatively lower value contributor, but this is expected to change in the future as the US streaming market becomes saturated. Netflix has expanded into more than 190 countries.

KEY TRENDS

Online Streaming

There is a very clear shift of video consumption to the Internet, and Netflix is one of the companies leading this change. The company's DVD subscribers are declining and future growth will come from streaming subscribers. Eventually, the company would like to replace all of its physical DVDs with the online library.

International Expansion

Netflix has been rapidly rolling out its service into new markets and has seen a strong uptake in those markets. We expect that to continue going forward. The company now has a presence in more than 190 countries.

Increasing Competition in Online Streaming

Netflix has been facing increasing competition in online streaming. Along with Amazon and Hulu, there are more and more streaming options from companies such as CBS, HBO, Disney+ and Apple.

Growing Focus On Improving Content and increasing Original Content

Netflix’s original content has improved the perception of the overall brand. The company’s original programming has garnered critical acclaim by scoring many award nominations in recent years, including House of Cards, Orange is the New Black, The Crown, the Stranger Things series, to name a few. Netflix has effectively marketed these exclusive shows to maintain its subscriber momentum.

Recent Trefis Articles

Is Netflix Stock A Good Buy At $500?

Despite almost a 70% increase from its March 2020 lows, at the current price of $502 per share, we believe Netflix stock (NASDAQ: NFLX) is still undervalued. Netflix stock rallied from $300 to $502 off its recent 2020 bottom, compared to the S&P 500 which increased over 85% from its recent bottom. ...More



What’s The Effect Of Netflix Missing Its Subscriber Growth Target?

Netflix stock (NASDAQ: NFLX) dropped 7.5% in just the last one week (five trading days). The stock which now trades at $505 underperformed the broader market (S&P 500) which remained flat during the week. The fall in NFLX stock price followed the Q1 2021 results of the company. ...More



Will Netflix Stock Become A Cash Generating Machine?

While Netflix (NASDAQ:NFLX) has consistently improved its profitability, with EPS rising 20x over the last five years, this came at the expense of deteriorating cash flows, as the company doubled down on content investments. Cash burn, measured in terms of free cash flows deteriorated from around -$840 million in 2015 to a whopping -$3.3 billion in 2019. ...More



Netflix Stock Set To Hit $600?

Despite a more than 70% rise since its March 2020 lows, at the current price of $513 per share, we believe Netflix stock (NASDAQ: NFLX) is still a good bet. Netflix stock rallied from $299 to $513 off its recent 2020 bottom, compared to the S&P 500 which increased a little over 75% from its recent bottom. ...More



Netflix Stock Surges 13% In A Week – What Are The Chances Of Further Rise?

Netflix stock (NASDAQ: NFLX) has increased 13% over the last 5 trading days, after the company reported better than expected Q4 and FY 2020 results. The streaming giant added 8.51 million new subscribers in Q4 2020, much higher than its own forecast and analysts’ expectations of 6.06 million. It passed the 200 million subscriber milestone for the first time. ...More



Netflix Stock Drops 11% In A Month; Opportunity For Investors?

Despite a 64% rise since its March lows of this year, at the current price near $490 per share, we believe Netflix stock (NASDAQ: NFLX)  still has some upside left. Netflix stock rallied from $299 to $491 off its recent bottom, compared to the S&P 500 which increased by 60% from its recent bottom. ...More



Netflix Recovers 80% In 5 Months; Gone Too Far?

After more than a 80% increase since its March 16 lows of this year, at the current price of around $550 per share we believe Netflix stock (NASDAQ: NFLX) has surpassed its near-term potential. Netflix stock increased from close to $300 to about $550 off its recent bottom, compared to the S&P which increased by around 57% from its recent lows. ...More



Is Netflix Really Worth $500?

Following a 68% rise since the March 16 lows of this year, at the current price of around $502 per share, we believe Netflix stock (NASDAQ: NFLX) is above its near-term potential. Netflix stock increased from $299 to $549 off its recent bottom, compared to the S&P which increased by around 45% from its recent lows. ...More



What’s Happening with Netflix Stock?

[7/20/2020] Netflix Stock Drops On Weak Q3 Subscriber Guidance Netflix stock (NYSE:NFLX) fell by about 13% over the last week - declining from about $569 to around $493 - as the company published its Q2 earnings and guided lower-than-expected subscriber adds for the third quarter. ...More



Netflix: 1 Wipeout Risk

[6/24/2020] Netflix Pricing And Margins Risk Netflix (NASDAQ:NFLX) has moved the price lever enviably not just once but twice over the last three years. The company raised pricing on its most popular plan from $10 to $11 in 2017 and once again to $13 in early 2019. ...More



Should You Pick Netflix Stock Over Microsoft?

Microsoft stock (NASDAQ:MSFT) has rallied by about 130% since the beginning of 2018, slightly outpacing Netflix stock (NASDAQ: NFLX) which is up by about 120% over the same period. That's good for Microsoft, but is it justified? We don’t think it is, due to a couple of reasons. ...More



Netflix Stock: An Easy 2x

Is Netflix’s stock (NASDAQ: NFLX) pricey, trading at about 100x earnings? Not at all. Especially if you consider the fact that the earnings could be about 4x the current level in the next few years. ...More



Netflix vs. WWE: Who Has The Edge?

Netflix’s stock (NASDAQ: NFLX) is up by about 30% so far in 2020, whereas World Wrestling Entertainment stock (NYSE: WWE) is down by 30%. If we compare the stock price trends for these two companies over the years, we see that Netflix’s stock price growth of 246% from $124 at the end ... ...More



Netflix One Question: Is It Losing Money Or Making Money?

Netflix stock (NASDAQ:NFLX) has emerged a star performer through the coronavirus pandemic, rising by ~25% year-to-date, as people consume more content while being confined to their homes. The company added close to 16 million subscribers over the first quarter, handily beating its guidance of about 7 million new subscribers. ...More



Netflix Subscriber Growth 2x Expectations; Good News Or Peak?

Netflix (NASDAQ: NFLX) released its Q1 2020 earnings report after the market close on April 21, 2020. The streaming content giant’s stock had soared ahead of earnings as investors anticipated an excellent quarter fueled by consumers forced to stay at home amidst the ongoing COVID-19 lockdown. ...More



Netflix Stock Up 14% In 2020 At $375 Despite COVID-19; Is It Sustainable?

After almost a 14% rise in Netflix (NASDAQ: NFLX) stock since the beginning of this year, at the current price of $375 per share, we believe Netflix stock is likely to remain around the current elevated level considering the positive impact of the ongoing coronavirus crisis on streaming players. ...More



Will Coronavirus Really Help Or Hurt Netflix Stock?

Netflix stock (NASDAQ:NFLX) has fared better than the broader markets through the current Coronavirus/Oil price war crisis, with the stock currently up by about 2% since early February, after the WHO declared a global health emergency. In comparison, the S&P 500 is down by about 18%. ...More



Netflix Stock Is Up 28% In 4 Months; Can It Still Head Higher?

Netflix (NASDAQ: NFLX) saw its stock price jump by almost 28% over the last four months, on account of better than expected international streaming growth and continuously improving profitability. Though the company beat revenue and earnings consensus for Q4 and FY 2019, the stock price fell by 3. ...More



How Good Is Netflix’s Stock At Rebounding From Large Drops?

Netflix stock has seen a fair amount of volatility over the last few months on account of mounting competition from the likes of Disney+ as well as due to weaker-than-expected U.S. subscriber figures. ...More



Why Netflix Should Launch An Ad-Supported Plan, Despite Its Past Reservations

Trefis concludes from its detailed interactive dashboard Why Netflix Should Seriously Consider An Ad-Supported Tier For The U.S.  that Netflix could revive U.S. ...More



My Notes

Name (Required)
Email (Required, but never displayed)