Netflix Stock Analysis: Is It the Right Time?

Are you thinking about what to do with Netflix shares? You are not alone. For those holding shares or looking from the outside, recent developments are striking. Netflix continues to surprise investors with its content strategy, international expansion, and innovations in the streaming world.

The stock started the year with a 23.5% increase, gaining 45.1% over the past 12 months. However, Netflix experienced a 9.6% drop last month, losing 8.7% in just the past week. These fluctuations are attributed to rumors about new players in the sector announcing strategic partnerships and regulatory changes. At the same time, Netflix's significant moves towards ad-supported tiers and original content are fueling discussions about future growth potential.

So, is this the right time? Should you buy, hold, or take profits? To answer this question, we need to conduct a valuation analysis. According to traditional metrics, Netflix receives only 2 out of 6 on widespread underperformance checks. This indicates that while some metrics see upside potential, others remain cautious.

The Discounted Cash Flow (DCF) method projects a company's expected future cash flows and discounts them to present value. This approach is widely used as it focuses on a company’s ability to generate cash over time. Netflix's current free cash flow is approximately $9.1 billion. Analyst estimates predict that free cash flow will rise to $20.6 billion by 2029. Simply Wall St extends these numbers to 2035, forecasting a continued upward trend.

Based on the latest DCF analysis, Netflix's estimated intrinsic value is calculated at $878.51. However, the stock is currently trading at a level 24.6% above this mark, suggesting that Netflix is currently overvalued.

The Price/Earnings (P/E) ratio is a commonly used metric for valuing profitable companies like Netflix. Currently, Netflix is trading at a P/E ratio of 44.53x. This ratio is significantly above the industry average of 27.32x and exceeds that of similar competitors on the list. Simply Wall St has calculated a specific 'Fair Ratio' of 37.97x that reflects Netflix's growth expectations, margins, and risks. Netflix's current P/E ratio is significantly higher than the Fair Ratio, indicating that the market is attributing a premium beyond the fundamentals.

This data suggests that Netflix is 24.6% overvalued. But where does the real opportunity lie? Create your own narrative and join the community!

A Narrative is your personal story and perspective regarding the company. For Netflix, two different scenarios are as follows:

🐂 Netflix Bull Analysis
Fair Value: $1,350.32
Current Price vs. Fair Value: %18.9 undervalued
Revenue Growth Rate: %12.5
Competitive content and international partnerships are expected to enhance monetization.

🐻 Netflix Bear Analysis
Fair Value: $797.74
Current Price vs. Fair Value: %37.9 overvalued
Revenue Growth Rate: %13.0
Some estimates suggest that Netflix's value could be as low as $750, while others forecast it could reach $1,600.