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Is Netflix cheap?
@BillAckman seems to think so, making a $1.1 Billion investment recently.
$NFLX is down ~36% YTD (19 trading days). Their market value is now $170 Billion.
Is Netflix cheap?
@BillAckman seems to think so, making a $1.1 Billion investment recently.
$NFLX is down ~36% YTD (19 trading days). Their market value is now $170 Billion.
1/
$NFLX stock was down ~20% in one day, after management warned subscriber growth would slow down significantly for the beginning of 2022.
Overall guidance was pessimistic and below analyst expectations.
$NFLX stock was down ~20% in one day, after management warned subscriber growth would slow down significantly for the beginning of 2022.
Overall guidance was pessimistic and below analyst expectations.
2/
In a nutshell, the future value for $NFLX relies upon:
- Continuing to be dominant leaders in SVOD market (currently about double $DIS in subscribers).
- Expanding margins as less content spend is required to maintain & grow subscriber base.
In a nutshell, the future value for $NFLX relies upon:
- Continuing to be dominant leaders in SVOD market (currently about double $DIS in subscribers).
- Expanding margins as less content spend is required to maintain & grow subscriber base.
3/
Last year $NFLX spent ~$17B on content.
There are 2 important questions about that content spend.
1. How much will content spend need to grow incrementally moving forward?
2. How much of the $17B of content contributes to growth of new subs vs. maintains existing subs?
Last year $NFLX spent ~$17B on content.
There are 2 important questions about that content spend.
1. How much will content spend need to grow incrementally moving forward?
2. How much of the $17B of content contributes to growth of new subs vs. maintains existing subs?
4/
If $NFLX sales CAGR over 5Y is ~15% and content spend only increases annually by 5-10%, we will see a significant increase in margins.
But the obvious question would be, is 5-10% enough to continue to grow & maintain subs whilst renaming the SVOD market leader?
If $NFLX sales CAGR over 5Y is ~15% and content spend only increases annually by 5-10%, we will see a significant increase in margins.
But the obvious question would be, is 5-10% enough to continue to grow & maintain subs whilst renaming the SVOD market leader?
5/
I’m really curious about the growth vs maintenance split of the $17B content spend. Would love to hear $NFLX bulls opinions.
In 2016, Netflix spent ~$7B on content and continued to grow subs at impressive rates…
I’m really curious about the growth vs maintenance split of the $17B content spend. Would love to hear $NFLX bulls opinions.
In 2016, Netflix spent ~$7B on content and continued to grow subs at impressive rates…
6/
… I’d speculate that $7B *could* potentially be enough to maintain current level of subs. Implying that $10B of the spend is for growth.
Could we then make an adjustment to FCF (~$0 for FY21) and say $NFLX owner’s earnings is ~$10B?
… I’d speculate that $7B *could* potentially be enough to maintain current level of subs. Implying that $10B of the spend is for growth.
Could we then make an adjustment to FCF (~$0 for FY21) and say $NFLX owner’s earnings is ~$10B?
7/
That number would suggest that $NFLX trades at 17x owner’s earnings. Which would be quite appealing…
but I am making assumptions to get to that valuation. I am certainly no expert on $NFLX, just dabbling after the recent drop in price.
That number would suggest that $NFLX trades at 17x owner’s earnings. Which would be quite appealing…
but I am making assumptions to get to that valuation. I am certainly no expert on $NFLX, just dabbling after the recent drop in price.
8/
Even ignoring the adjustments for owners earnings (could be thinking about it wrong)..
The appeal could be for revenue growth to outpace the incremental increase of content spend, which would lead to significant improvement in margins either way. That aspect is interesting.
Even ignoring the adjustments for owners earnings (could be thinking about it wrong)..
The appeal could be for revenue growth to outpace the incremental increase of content spend, which would lead to significant improvement in margins either way. That aspect is interesting.
9/
Would love to hear thoughts from any $NFLX bulls about some of the questions raised in this thread.
Tag any shareholders!
@TSOH_Investing ?
Would love to hear thoughts from any $NFLX bulls about some of the questions raised in this thread.
Tag any shareholders!
@TSOH_Investing ?
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