DCF Studio

    NFLX · NMS · Communication Services

    Netflix, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 91.18

    Market price

    USD 71.79

    Implied upside

    +27.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Value Per Share

    Perpetuity growth
    USD 91.18+27.0%
    Exit multiple
    USD 106.74+48.7%
    Market price
    USD 71.79

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn25bn49bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 50.9bnUSD 57.3bnUSD 64.6bnUSD 72.7bnUSD 81.9bn+12.6%
    EBITUSD 12.0bnUSD 13.6bnUSD 15.3bnUSD 17.2bnUSD 19.4bn+12.6%
    NOPATUSD 10.4bnUSD 11.8bnUSD 13.3bnUSD 14.9bnUSD 16.8bn+12.6%
    Add depreciation & amortisationUSD 21.1bnUSD 23.8bnUSD 26.8bnUSD 30.1bnUSD 33.9bn+12.6%
    Less capital expenditureUSD -632.8mUSD -712.8mUSD -802.9mUSD -904.3mUSD -1.0bn+12.6%
    Less increase in working capitalUSD -314.7mUSD -354.5mUSD -399.3mUSD -449.8mUSD -506.6m+12.6%
    Free cashflow to firmUSD 30.6bnUSD 34.5bnUSD 38.8bnUSD 43.7bnUSD 49.2bn+12.6%
    Discount factor0.94460.84290.75210.67110.5988-
    Present valueUSD 28.9bnUSD 29.0bnUSD 29.2bnUSD 29.3bnUSD 29.5bn+0.5%
    Present Value Of The ForecastUSD 145.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.352Reported 1.526, pulled toward 1.0 (Blume)
    Cost of equity12.44%Risk-free + beta x equity risk premium
    Cost of debt5.17%Interest expense / average total debt
    Market capitalisationUSD 298.9bn95.4% of capital
    Total debtUSD 14.5bn4.6% of capital, book value as a proxy
    Tax rate13.3%Effective, capped at statutory
    WACC12.07%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 91.18

    64% of EV

    Forecast FCFF, final year
    USD 49.2bn
    Capex at depreciation, working capital in reinvestment
    USD 45.6bn
    Less reinvestment at g/ROIC (12.6% of NOPAT)
    USD -5.8bn
    Capitalised
    USD 39.8bn
    ROIC (reported)
    19.8%
    Terminal value, undiscounted
    USD 426.7bn
    Terminal value, discounted
    USD 255.5bn
    Enterprise value
    USD 401.5bn
    Less net debt
    USD 5.4bn
    Equity value
    USD 396.1bn

    Exit at 10.1x EBITDA

    Value per shareUSD 106.74

    69% of EV

    Terminal value, undiscounted
    USD 539.6bn
    Terminal value, discounted
    USD 323.1bn
    Enterprise value
    USD 469.0bn
    Less net debt
    USD 5.4bn
    Equity value
    USD 463.6bn

    Spread between methods: 16%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    10.07%108.54111.38114.56118.18122.32
    11.07%97.2899.29101.51104.00106.78
    12.07%88.1489.5991.1892.9294.85
    13.07%80.5981.6482.7984.0385.39
    14.07%74.2375.0175.8476.7377.70

    Outlined: this model. Green text: above today's price of 71.79. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year12.6%6.5%-6.1pp
    EBIT margin23.7%9.8%-13.8pp
    Discount rate12.1%14.7%+2.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.