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Category: Netflix and Stock Market
Last updated: 27 May 2020 Stock price: $414.77 On this page we will look to provide more details about Netflix, the world's biggest streaming service with over 182 million subscribers. The information on this page aims to provide interesting details and facts about Netflix not regularly covered in the media.
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About Netflix (NASDAQ: NFLX)
Netflix, Inc. (“Netflix”, “the Company”, “we”, or “us”) is the world’s leading subscription streaming entertainment service with over 182 million paid streaming memberships in over 190 countries enjoying TV series, documentaries and feature films across a wide variety of genres and languages. Members can watch as much as they want, anytime, anywhere, on any internet-connected screen. Members can play, pause and resume watching, all without commercials.
Additionally, over two million members in the United States ("U.S.") subscribe to our legacy DVD-by-mail service. We are a pioneer in the delivery of streaming entertainment, launching our streaming service in 2007. Since this launch, we have developed an ecosystem for internet-connected screens and have added increasing amounts of content that enable consumers to enjoy entertainment directly on their internet-connected screens. As a result of these efforts, we have experienced growing consumer acceptance of, and interest in, the delivery of streaming entertainment. Our core strategy is to grow our streaming membership business globally within the parameters of our operating margin target. We are continuously improving our members' experience by expanding our streaming content with a focus on a programming mix of content that delights our members and attracts new members. In addition, we are continuously enhancing our user interface and extending our streaming service to more internet-connected screens. Our members can download a selection of titles for offline viewing.
Additionally, over two million members in the United States ("U.S.") subscribe to our legacy DVD-by-mail service. We are a pioneer in the delivery of streaming entertainment, launching our streaming service in 2007. Since this launch, we have developed an ecosystem for internet-connected screens and have added increasing amounts of content that enable consumers to enjoy entertainment directly on their internet-connected screens. As a result of these efforts, we have experienced growing consumer acceptance of, and interest in, the delivery of streaming entertainment. Our core strategy is to grow our streaming membership business globally within the parameters of our operating margin target. We are continuously improving our members' experience by expanding our streaming content with a focus on a programming mix of content that delights our members and attracts new members. In addition, we are continuously enhancing our user interface and extending our streaming service to more internet-connected screens. Our members can download a selection of titles for offline viewing.
Quick facts about Netflix
- Netflix is listed on the Nasdaq under the stock code ticker: NFLX
- 182.86 million subscribers as at the end of their 1Q 2020
- Average monthly revenue per paying membership $ 10.82
- Operating margin: 13%
- Revenues for their 2019 fiscal year: $20.156 billion
- Shares in issue for Netflix: 451.765 million
- Earnings per share (EPS) for full fiscal 2019: $4.13
- Cash and cash equivalents at the end of 2019 fiscal year: $5.018 billion
Strategy of Netflix
Our core strategy is to grow our streaming membership business globally within the parameters of our operating margin target. We are continuously improving our members' experience by expanding our streaming content with a focus on a programming mix of content that delights our members and attracts new members. In addition, we are continuously enhancing our user interface and extending our streaming service to more internet-connected screens. Our members can download a selection of titles for offline viewing.
Netflix revenues by region
Below we take a look at the revenues, average number of paying memberships and the average monthly revenue per paying membership for the 4 main regions of Netflix, which includes:
United States and Canada
Europe, Middle East and Africa
Latin America
Asia Pacific
- United States and Canada
- Europe, Middle East and Africa
- Latin America
- Asia Pacific
United States and Canada
- Revenues $ 10.051 billion
- Average paying memberships 66.615 million
- Average monthly revenue per paying membership: $12.57
Europe, Middle East and Africa
- Revenues $5.543 billion
- Average paying memberships 44.731 million
- Average monthly revenue per paying membership: $10.33
Latin America
- Revenues $2.795 billion
- Average paying memberships 28.391 million
- Average monthly revenue per paying membership: $8.21
Asia Pacific
- Revenues $$1.469 billion
- Average paying memberships 13.247 million
- Average monthly revenue per paying membership: $9.24
Competition of Netflix
The market for streaming entertainment is intensely competitive and subject to rapid change. We compete against other entertainment video providers, such as multichannel video programming distributors ("MVPDs"), streaming entertainment providers (including those that provide pirated content), video gaming providers and more broadly against other sources of entertainment that our members could choose in their moments of free time. We also compete against streaming entertainment providers and content producers in obtaining content for our service, both for licensed streaming content and for original content projects. While consumers may maintain simultaneous relationships with multiple entertainment sources, we strive for consumers to choose us in their moments of free time. We have often referred to this choice as our objective of "winning moments of truth." In attempting to win these moments of truth with our members, we are continually improving our service, including both our technology and our content, which is increasingly exclusive and curated, and includes our own original programming.
Intellectual property of Netflix, seasonality of the business and employees
We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies and similar intellectual property as important to our success. We use a combination of patent, trademark, copyright and trade secret laws and confidentiality agreements to protect our proprietary intellectual property. Our ability to protect and enforce our intellectual property rights is subject to certain risks and from time to time we encounter disputes over rights and obligations concerning intellectual property. We cannot provide assurance that we will prevail in any intellectual property disputes.
Seasonality of our business
Our membership growth exhibits a seasonal pattern that reflects variations when consumers buy internet-connected screens and when they tend to increase their viewing. Historically, the first and fourth quarters (October through March) represent our greatest streaming membership growth. In addition, our membership growth can be impacted by our content release schedule and changes to pricing
Employees
As of December 31, 2019, we had approximately 8,600 full-time employees.
Our membership growth exhibits a seasonal pattern that reflects variations when consumers buy internet-connected screens and when they tend to increase their viewing. Historically, the first and fourth quarters (October through March) represent our greatest streaming membership growth. In addition, our membership growth can be impacted by our content release schedule and changes to pricing
Employees
As of December 31, 2019, we had approximately 8,600 full-time employees.
Netflix (NFLX) stock performance
The following graph compares, for the five year period ended December 31, 2019, the total cumulative stockholder return on the Company’s common stock, as adjusted for the seven-for-one stock split that occurred in July 2015, with the total cumulative return of the NASDAQ Composite Index, the S&P 500 Index and the RDG Internet Composite Index. Measurement points are the last trading day of each of the Company’s fiscal years ended December 31, 2014, December 31, 2015, December 31, 2016, December 31, 2017, December 31, 2018 and December 31, 2019. Total cumulative stockholder return assumes $100 invested at the beginning of the period in the Company’s common stock, the stocks represented in the NASDAQ Composite Index, the stocks represented in the S&P 500 Index and the stocks represented in the RDG Internet Composite Index, respectively, and reinvestment of any dividends. Historical stock price performance should not be relied upon as an indication of future stock price performance
A $100 invested at the end of December 2014 would have resulted in an investment worth around $650 as at the end of December 2019. That is an annual growth rate of 45% over the last 5 years, which is exceptionally strong returns provided to stockholders, this while the S&P 500 provided an average annual return of 11.2%. So the stock of Netflix has grown at 4 times that of the S&P 500.
Our latest Netflix stock valuation (22 April 2020)
So based on the earnings report of Netflix (NASDAQ: NFLX) what do we value Netflix (NFLX) stock at? Based on the earnings report and the increased competition our valuation models sets a target (full value) price on Netflix of $319.20. (up strongly from our 4th quarter 2019 Netflix earnings report valuation). Based on our target price (full value price) we believe the stock of Netflix is overvalued.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $319,20. We therefore believe a good entry point into Netflix is $287.30 or below. Since the stock of Netflix is well above our recommended entry point we would not recommend buying into Netflix right now as we believe there is still a lot of hope and fairytales and butterflies built into their future earnings expectations with the group trading at a PE ratio of over 69
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $319,20. We therefore believe a good entry point into Netflix is $287.30 or below. Since the stock of Netflix is well above our recommended entry point we would not recommend buying into Netflix right now as we believe there is still a lot of hope and fairytales and butterflies built into their future earnings expectations with the group trading at a PE ratio of over 69