Netflix Inc (NASDAQ:NFLX) Earnings Model
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Model Methodology: Historic results are disaggregated by segment (U.S. Streaming, International Streaming, and DVDs). Future revenue is projected using estimates for growth in subscribers and average revenue per subscriber. Ratio analysis is used to complete the Income Statement.The model is calibrated to meet management's guidance and consensus estimates as a "base-case" scenario. You can enter your own assumptions into the blue cells to form your own earnings forecast.
Basic Version: Includes 4 quarters of forecasts, Income Statement and Segment details.
Premium Version: Includes ~5 years of forecasts, Income Statement, Segment details, Balance Sheet, Cash Flow, and valuation.
Date of last Model Update: 10/16/2019
Model Developer: John Moschella, CFA, CPA
Basic Version: Includes 4 quarters of forecasts, Income Statement and Segment details.
Premium Version: Includes ~5 years of forecasts, Income Statement, Segment details, Balance Sheet, Cash Flow, and valuation.
Date of last Model Update: 10/16/2019
Model Developer: John Moschella, CFA, CPA
Models From Our Community (2Q2019 Earnings Release)
Netflix Inc
Model Developer: Ross Griffiths
Last Updated: July 17, 2019
View on Netflix: Bearish
Modeling Approach: This model uses estimates of domestic and international streaming subscriber additions, margins and cash content expenditure to project earnings, and integrates the financial statements using ratio analysis. The model uses DCF and earnings multiple techniques to estimate target share prices under Base, Bull and Bear case scenarios, and uses sensitivity analysis to test the impact of the model's underlying assumptions on the price estimate.
Disclosure: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.
Model Developer: Ross Griffiths
Last Updated: July 17, 2019
View on Netflix: Bearish
Modeling Approach: This model uses estimates of domestic and international streaming subscriber additions, margins and cash content expenditure to project earnings, and integrates the financial statements using ratio analysis. The model uses DCF and earnings multiple techniques to estimate target share prices under Base, Bull and Bear case scenarios, and uses sensitivity analysis to test the impact of the model's underlying assumptions on the price estimate.
Disclosure: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.
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About Gutenberg ResearchWe are an interactive earnings modeling community, driving the evolution of equity research. Our mission is to make dynamic earnings models, available to everyone. We are currently building an inventory of models covering companies...continue reading
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Modeling Training ProgramOur Certificate in Financial Modeling Program provides an easy to follow, step-by-step approach to financial modeling training. In this program we build a financial model from the ground up..continue reading
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New to Earnings Modeling? Check Out Our Training Program or Textbook
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In this program we build a financial model from the ground up, starting with a blank spreadsheet, and ending with a comprehensive set of interrelated financial statements and share valuation estimates. There are three primary components to the program, all designed to add various elements to your training: 1) the written curriculum, 2) demonstration videos, and 3) supporting spreadsheets. At the completion of this training program you will receive a Certificate in Financial Modeling from The Equity Research Institute at Gutenberg Research. In order to qualify for the Certificate, you must pass our financial modeling exam which covers the topics in the program curriculum, and submit an earnings model based on the methods described in the program curriculum.
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This book demonstrates step-by-step how to create a financial model, similar to the models maintained by Wall Street equity research analysts. The accompanying spreadsheets demonstrate the key concepts and can be used as templates to create an earnings model for nearly any company. Readers without prior financial analysis experience will gain a fundamental understanding of exactly what modeling entails, and will learn how to create a basic form of an earnings model. Advanced readers will be introduced to more complex topics such as linking the financial statements, future period calibration, and incorporating macroeconomic variables into discounted valuation analysis through the equity risk premium and application of the capital asset pricing model.
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Models From Our Community (Prior to 2019)
Susanna Manziaris
Last Updated: May 26, 2017
View on Netflix: Bullish
Price Target: $170
Summary of Model Assumptions: In my Netflix DCF model I have foretasted strong revenue growth averaging 3% over the next five years as the company continues to ramp its European presence, original content offerings in the U.S, and increased per user revenue. I am modeling an improvement in profitability with a gross profit of 31.14% by 2021. My DCF valuation of $170 per share is based on a terminal growth rate of 3% and a WACC of 11.0% which incorporates a required return on equity of 11.5% based on an ERP estimate of 6% in Beta of 1.53, and risk-free rate of 2.25%.
View on Netflix: Bullish
Price Target: $170
Summary of Model Assumptions: In my Netflix DCF model I have foretasted strong revenue growth averaging 3% over the next five years as the company continues to ramp its European presence, original content offerings in the U.S, and increased per user revenue. I am modeling an improvement in profitability with a gross profit of 31.14% by 2021. My DCF valuation of $170 per share is based on a terminal growth rate of 3% and a WACC of 11.0% which incorporates a required return on equity of 11.5% based on an ERP estimate of 6% in Beta of 1.53, and risk-free rate of 2.25%.
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Brandon Smith
Last Updated: January 7, 2017
View on Netflix: Bullish
Price Target: $127
Summary of Model Assumptions: Netflix (NASDAQ: NFLX), has been surging for the last five quarters with no sights of that stopping in the near future. Last quarter, Netflix added 3.57 million new subscribers, blowing away its forecast of 2.3 million new subscribers. Netflix has really taken off internationally, where nearly 3.2 million subscribers of the 3.57 million were new international members. In the quarters to come, I believe that Netflix is going to continue to expand their international presence, which will hopefully lead to better profit margins down the line. I took a bullish approach for their international market, and raised the International Paid Member Growth to 13% in 2016 and decreasing by 0.5% each quarter for three quarters, where it will eventually level off at 11.5%. In my opinion, the Domestic DVD segment of Netflix is going to continue to plummet as the use of DVD’s continues to decrease from quarter to quarter. For this, I am going to assume a 4.5% decrease in total paid members for two quarters with an eventual decrease to 4% in the two quarters following. Lastly, with the continuation of additional content being added to Netflix, I predicted that the Domestic Member Growth will increase by 5% in March 2017, and continue to grow at a rate of 3% for the following three quarters.
View on Netflix: Bullish
Price Target: $127
Summary of Model Assumptions: Netflix (NASDAQ: NFLX), has been surging for the last five quarters with no sights of that stopping in the near future. Last quarter, Netflix added 3.57 million new subscribers, blowing away its forecast of 2.3 million new subscribers. Netflix has really taken off internationally, where nearly 3.2 million subscribers of the 3.57 million were new international members. In the quarters to come, I believe that Netflix is going to continue to expand their international presence, which will hopefully lead to better profit margins down the line. I took a bullish approach for their international market, and raised the International Paid Member Growth to 13% in 2016 and decreasing by 0.5% each quarter for three quarters, where it will eventually level off at 11.5%. In my opinion, the Domestic DVD segment of Netflix is going to continue to plummet as the use of DVD’s continues to decrease from quarter to quarter. For this, I am going to assume a 4.5% decrease in total paid members for two quarters with an eventual decrease to 4% in the two quarters following. Lastly, with the continuation of additional content being added to Netflix, I predicted that the Domestic Member Growth will increase by 5% in March 2017, and continue to grow at a rate of 3% for the following three quarters.
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Ross Griffiths
Last Updated: August 11, 2017
View on Netflix: Sell
Price Target: $142
Summary: Netflix (NASDAQ:NFLX) reported Q2 2017 results that beat management guidance and analyst estimates on subscriber growth, with revenue and earnings broadly in line with consensus estimates. Following the announcement, I remain optimistic on the company’s prospects, but maintain the view that the company’s stock appears overvalued. Q2 results were well-received by the market and the company’s stock rose to $183 in post-market trading. Given its elevated valuation, $171.40 at the time of writing, I am downgrading the stock to a SELL with a target price of $142 based on a DCF valuation and a multiple of 20X 2021 EPS... click to continue reading.
View on Netflix: Sell
Price Target: $142
Summary: Netflix (NASDAQ:NFLX) reported Q2 2017 results that beat management guidance and analyst estimates on subscriber growth, with revenue and earnings broadly in line with consensus estimates. Following the announcement, I remain optimistic on the company’s prospects, but maintain the view that the company’s stock appears overvalued. Q2 results were well-received by the market and the company’s stock rose to $183 in post-market trading. Given its elevated valuation, $171.40 at the time of writing, I am downgrading the stock to a SELL with a target price of $142 based on a DCF valuation and a multiple of 20X 2021 EPS... click to continue reading.
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Eric Li
Last Updated: November 24, 2016
View on Netflix: Neutral
Price Target: $117
Summary of Model Assumptions: I estimate member growth for the fourth quarter will be in-line with management's guidance. For 2017, I estimate revenue will grow nearly 29% year-over-year as growth in the International Streaming Segment accelerates. My model assumes the company’s operating margin will increase to approximately 8% in 2017 from 6% in 2016 as marketing costs are spread across a higher revenue base. The resulting GAAP EPS for 2017 is $0.96 assuming a stable increase in shares outstanding.
View on Netflix: Neutral
Price Target: $117
Summary of Model Assumptions: I estimate member growth for the fourth quarter will be in-line with management's guidance. For 2017, I estimate revenue will grow nearly 29% year-over-year as growth in the International Streaming Segment accelerates. My model assumes the company’s operating margin will increase to approximately 8% in 2017 from 6% in 2016 as marketing costs are spread across a higher revenue base. The resulting GAAP EPS for 2017 is $0.96 assuming a stable increase in shares outstanding.
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