Netflix Valuation Needs to Chill

We took a fresh look at Netflix (NFLX) in light of the company's recent quarterly results and revised guidance.

Niel Macker 24.07.2018 | 8:10
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As a result, we have raised our fair value estimate to $120 per share from $90 to account for slightly faster margin improvement in the U.S. and international segments, faster growth in international net subscriber additions, and slightly faster growth in average monthly revenue per paying member in the United States. Even with the fair value estimate increase, however, the shares still appear fundamentally overvalued to us. Our 1-star rating rests on five key points about narrow-moat Netflix and the competitive landscape in which it operates.

First, we believe that the level of competition in the U.S. and internationally is increasing and will continue to do so in the near future. Walt Disney (DIS) will launch its own branded subscription video on demand service in the second half of 2019, and other companies such as Walmart (WMT) are reportedly planning to enter the market as well.

Second, we suspect that these competitors plan on undercutting Netflix's pricing, which should limit the speed at which Netflix will able to increase prices. Disney management has promised to price its branded SVOD offering significantly under Netflix’s at launch.

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Verdipapirer nevnt i artikkel

Navn på verdipapirPrisEndring (%)Morningstar Rating Inc3 425,52 USD0,28Rating
Apple Inc146,92 USD0,06Rating
Facebook Inc A352,96 USD2,02Rating
Netflix Inc592,39 USD-0,15Rating
The Walt Disney Co176,00 USD-0,14Rating
Walmart Inc143,17 USD0,28Rating

Om forfatteren

Niel Macker  er aksjeanalytiker hos Morningstar.

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