![]() ![]() Sentiment still Drives Price in the Short Term In addition the company has demonstrated that it has pricing power and can increase prices without losing too many customers. The company is now benefiting from economies of scale and margins play an increasing role in the company’s intrinsic value. Investors were more concerned with growth and the potential for future profitability.Īs the following chart illustrates, the situation has changed since 2019 with earnings beginning to accelerate as more revenue makes it the bottom line. Until 2019, the company was barely profitable and operating cash flows were negative. Until recently, the key metric for Netflix was subscriber growth. This means that earnings forecasts will probably need to rise to maintain the price multiple. The risk to this price multiple is the fact that forecast earnings growth over the next few years is expected to lag the entertainment industry (23.4% vs 31.9%). The stock is currently trading on a price-to-earnings (P/E) ratio of 64X, which is very high compared to most stocks, but actually historically low for this company. However, we should keep in mind that for most of its trading history Netflix has been labelled as expensive. This implies there would only be 19% upside from the current price before the stock would be fairly valued. Our rough estimate of the fair value of Netflix, based on analyst forecasts, is $780. See our latest analysis for Netflix What is Netflix worth? Potential investors may now be wondering whether it's still worth chasing the stock at current levels. The latest price move confirms the stock’s breakout from a trading range which has frustrated market participants for over a year. Netflix has also dominated the ratings in the latest Nielsen Top10 Streaming programs surve y. This move has largely been attributed to the success of the new hit show Squid Game, which is on track to become the platform’s most streamed show. While the broader market, and specifically technology stocks, have declined the most since May, the price of Netflix shares has gained over 13%. ( NASDAQ:NFLX ) has been a standout performer over the last two weeks. This article originally appeared on Simply Wall St News. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |