Netflix Has Been Adjusting In Favor Of My Estimates, But There’s Still A Decent Upside Left

Summary:

  • Stock rose 31.47% (and 75.52% since my first coverage), driven by successful strategies like password-sharing crackdown and ad-enabled tier.
  • Password-sharing crackdown could yield $799M and advertisements $16.9B by 2029.
  • Fair price estimated at $733.25, and future price is projected at $1,287.74. This last one implies 17.1% annual returns throughout 2029.
  • Potential upside stands at 15.3%, which is not as incredible as before. Therefore, I am downgrading the stock to “buy”.

Netflix sign on its Los Angeles Headquarters building.

JHVEPhoto/iStock Editorial via Getty Images

Thesis

In my previous article about Netflix, Inc. (NASDAQ:NFLX) I rated the stock as a strong buy citing that its password-sharing crackdown efforts as well as the inclusion of an ads-enabled tier, will

TABLE OF ASSUMPTIONS
(Current data)
Assumptions Part 1
Equity Market Value 272,670.00
Debt Value 16,973.40
Cost of Debt 4.12%
Tax Rate 12.85%
10y Treasury 4.345%
Beta 1.04
Market Return 10.50%
Cost of Equity 10.75%
Assumptions Part 2
CapEx 348.60
Capex Margin 1.03%
Net Income 5,408.00
Interest 699.80
Tax 797.40
D&A 356.90
Ebitda 7,262.10
D&A Margin 1.06%
Interest Expense Margin 2.08%
Revenue 33,723.0

Netflix’s Core Revenue Advertisements Password Cracking
2022 31,615.8
2023 31,172.7 2,550.3
2024 33,136.6 4,945.0 133.2
2025 35,224.2 7,339.8 266.3
2026 37,443.3 9,734.5 399.5
2027 39,802.2 12,129.3 532.6
2028 42,309.8 14,524.0 665.8
2029 44,975.3 16,918.8 799.0

Net Income without Password-Cracking & Ads
2023 3,472.6
2024 3,691.4
2025 3,924.0
2026 4,171.2
2027 4,434.0
2028 4,713.3
2029 5,010.2

Revenue Net Income Plus Taxes Plus D&A Plus Interest
2024 $38,214.8 $8,769.61 $9,896.51 $10,300.95 $11,000.75
2025 $42,830.3 $11,549.45 $13,033.56 $13,438.00 $14,118.43
2026 $47,577.3 $14,324.03 $16,164.68 $16,668.21 $17,329.80
2027 $52,464.2 $17,114.21 $19,313.40 $19,868.64 $20,511.91
2028 $57,499.6 $19,920.95 $22,480.81 $23,089.34 $23,714.81
2029 $62,693.0 $22,745.30 $25,668.10 $26,331.60 $26,939.74
^Final EBITA^


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in NFLX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.


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