Where Will Netflix Stock Be In 2025

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Where Will Netflix Stock Be In 2025

seekingalpha2021-04-23

Summary Poor subscriber growth in early 2021 caused by growth pulled forward into 2020. Margins and price increases, plus continued subscriber growth, drive significant business value increases to ...

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Soo5519
·2021-04-25
Good
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1
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- Soo5519:
  Hi
  2021-04-25
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Jazling
·2021-04-25
Comment pls
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- Soo5519:
  Ok
  2021-04-25
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jonbeloved
·2021-04-25
Got many competitors in the market. They need to come out with better shows.
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yl2021
·2021-04-25
5x of current price??
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- Didilai:
  Like
  2021-04-25
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doky
·2021-04-25
Where?
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Seanytan
·2021-04-25
Let’s goooooo
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- doky:
  yup
  2021-04-25
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ReachinMoon
·2021-04-24
Woah
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4
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- Didilai:
  [What]
  2021-04-25
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Innovator
·2021-04-24
TLDR - subscriber growth still positive, good margin, low churn, good to hold for long term
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- 2021koon:
  agree. roku also not bad
  2021-04-24
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Topwong
·2021-04-24
Challenging
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MarketSpring
·2021-04-23
Be in the sky
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4
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Hibiki Anne
·2021-04-23
600.... that my target price.
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- Atwosome:
  wish you luck
  2021-04-23
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Keychain
·2021-04-23
Let’s see
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sharonyim
·2021-04-23
good read
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viknesn
·2021-04-23
Good read
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whitetea
·2021-04-23
Yes. Looking positively towards the future of Netflix! Especially how popular it is with teens.
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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NFLX","symbol_name":"奈飞","start_time":0,"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","article_id":"1114827926","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","pubTimestamp":1619185910,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NFLX":"奈飞"},"translate_title":"2025年Netflix,Inc.存量将何去何从","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NFLX":0.9},"content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":375118976,"gmtCreate":1619314970695,"gmtModify":1704722303059,"author":{"id":"3581544896129312","authorId":"3581544896129312","name":"Soo5519","avatar":"https://static.tigerbbs.com/7ea5d1c75bef9858dd1bf14b186f3584","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3581544896129312","idStr":"3581544896129312"},"htmlText":"Good&nbsp;","listText":"Good&nbsp;","text":"Good","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/375118976","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4125706,"gmtCreate":1619315010285,"gmtModify":1680785468161,"authorId":3581544896129312,"author":{"id":3581544896129312,"idStr":"3581544896129312","authorId":3581544896129312,"name":"Soo5519","avatar":"https://static.tigerbbs.com/7ea5d1c75bef9858dd1bf14b186f3584","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":375118976,"type":1,"supId":0,"prevId":0,"content":"Hi","text":"Hi","html":"Hi"}],"langContent":"EN"},{"id":375137483,"gmtCreate":1619314725442,"gmtModify":1704722297562,"author":{"id":"3566821013640470","authorId":"3566821013640470","name":"Jazling","avatar":"https://static.tigerbbs.com/85e0a83573d9307f57fca9b2baed72af","vip":1,"crmLevel":5,"crmLevelSwitch":1,"authorIdStr":"3566821013640470","idStr":"3566821013640470"},"htmlText":"Comment pls","listText":"Comment pls","text":"Comment pls","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/375137483","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4125687,"gmtCreate":1619314957437,"gmtModify":1680785467276,"authorId":3581544896129312,"author":{"id":3581544896129312,"idStr":"3581544896129312","authorId":3581544896129312,"name":"Soo5519","avatar":"https://static.tigerbbs.com/7ea5d1c75bef9858dd1bf14b186f3584","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":375137483,"type":1,"supId":0,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"}],"langContent":"EN"},{"id":375342268,"gmtCreate":1619312176854,"gmtModify":1704722238979,"author":{"id":"3560138341869725","authorId":"3560138341869725","name":"jonbeloved","avatar":"https://static.tigerbbs.com/1312ffb19627a11a2ad03b49693f53dd","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":2,"crmLevelSwitch":1,"authorIdStr":"3560138341869725","idStr":"3560138341869725"},"htmlText":"Got many competitors in the market. They need to come out with better shows.","listText":"Got many competitors in the market. They need to come out with better shows.","text":"Got many competitors in the market. They need to come out with better shows.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/375342268","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":375398161,"gmtCreate":1619305021153,"gmtModify":1704722143328,"author":{"id":"3576231438371359","authorId":"3576231438371359","name":"yl2021","avatar":"https://static.tigerbbs.com/9130003d93212acf586123bc8fe8a1e0","vip":1,"crmLevel":3,"crmLevelSwitch":0,"authorIdStr":"3576231438371359","idStr":"3576231438371359"},"htmlText":"5x of current price??","listText":"5x of current price??","text":"5x of current price??","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/375398161","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4125189,"gmtCreate":1619312700389,"gmtModify":1680785462800,"authorId":3579091077947115,"author":{"id":3579091077947115,"idStr":"3579091077947115","authorId":3579091077947115,"name":"Didilai","avatar":"https://static.tigerbbs.com/7c36c3a0e5eed09ce50765877a8f373c","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":375398161,"type":1,"supId":0,"prevId":0,"content":"Like","text":"Like","html":"Like"}],"langContent":"EN"},{"id":375393182,"gmtCreate":1619304780846,"gmtModify":1704722140091,"author":{"id":"3567308634822078","authorId":"3567308634822078","name":"doky","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"authorIdStr":"3567308634822078","idStr":"3567308634822078"},"htmlText":"Where?","listText":"Where?","text":"Where?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/375393182","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":375926057,"gmtCreate":1619280762879,"gmtModify":1704722078559,"author":{"id":"3576901642423072","authorId":"3576901642423072","name":"Seanytan","avatar":"https://static.tigerbbs.com/b4666501916dcce5c7144d9c1d39609a","vip":1,"crmLevel":1,"crmLevelSwitch":0,"authorIdStr":"3576901642423072","idStr":"3576901642423072"},"htmlText":"Let’s goooooo","listText":"Let’s goooooo","text":"Let’s goooooo","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/375926057","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4124001,"gmtCreate":1619304797883,"gmtModify":1680785444493,"authorId":3567308634822078,"author":{"id":3567308634822078,"idStr":"3567308634822078","authorId":3567308634822078,"name":"doky","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":375926057,"type":1,"supId":0,"prevId":0,"content":"yup","text":"yup","html":"yup"}],"langContent":"EN"},{"id":375005231,"gmtCreate":1619252068823,"gmtModify":1704721866197,"author":{"id":"3577588581874327","authorId":"3577588581874327","name":"ReachinMoon","avatar":"https://static.tigerbbs.com/65cb26db8281f0697fe2e9bea43a1925","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3577588581874327","idStr":"3577588581874327"},"htmlText":"Woah","listText":"Woah","text":"Woah","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/375005231","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4125192,"gmtCreate":1619312710690,"gmtModify":1680785462623,"authorId":3579091077947115,"author":{"id":3579091077947115,"idStr":"3579091077947115","authorId":3579091077947115,"name":"Didilai","avatar":"https://static.tigerbbs.com/7c36c3a0e5eed09ce50765877a8f373c","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":375005231,"type":1,"supId":0,"prevId":0,"content":"[What]","text":"[What]","html":"[What]"}],"langContent":"EN"},{"id":372772611,"gmtCreate":1619250431433,"gmtModify":1704721850773,"author":{"id":"3581893461138204","authorId":"3581893461138204","name":"Innovator","avatar":"https://static.tigerbbs.com/ce649485ad7a46d32719865b69f37d98","vip":1,"hat":"https://static.tigerbbs.com/b073a07f77dbe6b3bec6b12311fde6bd","crmLevel":6,"crmLevelSwitch":0,"authorIdStr":"3581893461138204","idStr":"3581893461138204"},"htmlText":"TLDR - subscriber growth still positive, good margin, low churn, good to hold for long term","listText":"TLDR - subscriber growth still positive, good margin, low churn, good to hold for long term","text":"TLDR - subscriber growth still positive, good margin, low churn, good to hold for long term","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/372772611","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4122241,"gmtCreate":1619263148411,"gmtModify":1680785410493,"authorId":3575363327829260,"author":{"id":3575363327829260,"idStr":"3575363327829260","authorId":3575363327829260,"name":"2021koon","avatar":"https://static.tigerbbs.com/ad08d3b98fb2d860daf2e2b2916dc11e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":372772611,"type":1,"supId":0,"prevId":0,"content":"agree. roku also not bad","text":"agree. roku also not bad","html":"agree. roku also not bad"}],"langContent":"EN"},{"id":372259661,"gmtCreate":1619222981453,"gmtModify":1704721406555,"author":{"id":"3580330681390064","authorId":"3580330681390064","name":"Topwong","avatar":"https://static.tigerbbs.com/5f391750e9e61481646f8b96856d14d2","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3580330681390064","idStr":"3580330681390064"},"htmlText":"Challenging&nbsp;","listText":"Challenging&nbsp;","text":"Challenging","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372259661","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":372150878,"gmtCreate":1619187228794,"gmtModify":1704721002174,"author":{"id":"3579081908053677","authorId":"3579081908053677","name":"MarketSpring","avatar":"https://static.tigerbbs.com/a8da1726ac847b9bc4dc7c678098409a","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3579081908053677","idStr":"3579081908053677"},"htmlText":"Be in the sky","listText":"Be in the sky","text":"Be in the sky","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372150878","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":372124040,"gmtCreate":1619187120480,"gmtModify":1704720999096,"author":{"id":"3578133999876009","authorId":"3578133999876009","name":"Hibiki Anne","avatar":"https://community-static.tradeup.com/news/fcb6b39c08c4bcc4c9db8978242b0202","vip":1,"crmLevel":3,"crmLevelSwitch":0,"authorIdStr":"3578133999876009","idStr":"3578133999876009"},"htmlText":"600.... that my target price.&nbsp;","listText":"600.... that my target price.&nbsp;","text":"600.... that my target price.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":5,"commentSize":1,"repostSize":0,"link":"https://ttm.financial/post/372124040","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":4114250,"gmtCreate":1619187155414,"gmtModify":1680785283660,"authorId":3571305152732730,"author":{"id":3571305152732730,"idStr":"3571305152732730","authorId":3571305152732730,"name":"Atwosome","avatar":"https://static.tigerbbs.com/2085a92415ef32924f70d916d490adce","vip":1,"currentWearingBadge":{"badgeId":"44212b71d0be4ec88898348dbe882e03-3","templateUuid":"44212b71d0be4ec88898348dbe882e03","name":"President Tiger","description":"The transaction amount of the securities account reaches $1,000,000","bigImgUrl":"https://static.tigerbbs.com/fbeac6bb240db7da8b972e5183d050ba","smallImgUrl":"https://static.tigerbbs.com/436cdf80292b99f0a992e78750ac4e3a","grayImgUrl":"https://static.tigerbbs.com/506a259a7b456f037592c3b23c779599","redirectLinkEnabled":0,"hasAllocated":1,"isWearing":1,"stampPosition":0,"hasStamp":0,"allocationCount":1,"allocatedDate":"2023.03.31","exceedPercentage":"93.46%","individualDisplayEnabled":0,"individualDisplaySort":0,"categoryType":1101},"crmLevel":8,"crmLevelSwitch":1,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":372124040,"type":1,"supId":0,"prevId":0,"content":"wish you luck","text":"wish you luck","html":"wish you luck"}],"langContent":"EN"},{"id":372121999,"gmtCreate":1619186912911,"gmtModify":1704720992757,"author":{"id":"3571801721484161","authorId":"3571801721484161","name":"Keychain","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":7,"crmLevelSwitch":0,"authorIdStr":"3571801721484161","idStr":"3571801721484161"},"htmlText":"Let’s see","listText":"Let’s see","text":"Let’s see","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372121999","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":372129997,"gmtCreate":1619186845419,"gmtModify":1704720988841,"author":{"id":"3581852273201777","authorId":"3581852273201777","name":"sharonyim","avatar":"https://static.tigerbbs.com/00f79e45ab6c11af64432ccbb28a68c5","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3581852273201777","idStr":"3581852273201777"},"htmlText":"good read","listText":"good read","text":"good read","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372129997","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":372161229,"gmtCreate":1619186525461,"gmtModify":1704720978452,"author":{"id":"3570432127764121","authorId":"3570432127764121","name":"viknesn","avatar":"https://static.tigerbbs.com/d6852b194b090892b9f0683613336e68","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3570432127764121","idStr":"3570432127764121"},"htmlText":"Good read","listText":"Good read","text":"Good read","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372161229","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":372185590,"gmtCreate":1619186257610,"gmtModify":1704720971092,"author":{"id":"3575627053369808","authorId":"3575627053369808","name":"whitetea","avatar":"https://static.tigerbbs.com/50005dfd44b247e618a01c5108cd058b","vip":1,"crmLevel":3,"crmLevelSwitch":0,"authorIdStr":"3575627053369808","idStr":"3575627053369808"},"htmlText":"Yes. Looking positively towards the future of Netflix! Especially how popular it is with teens.","listText":"Yes. Looking positively towards the future of Netflix! Especially how popular it is with teens.","text":"Yes. Looking positively towards the future of Netflix! Especially how popular it is with teens.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/372185590","repostId":1114827926,"repostType":4,"repost":{"id":"1114827926","pubTimestamp":1619185910,"share":"https://ttm.financial/m/news/1114827926?lang=&edition=fundamental","pubTime":"2021-04-23 21:51","market":"us","language":"en","title":"Where Will Netflix Stock Be In 2025","url":"https://stock-news.laohu8.com/highlight/detail?id=1114827926","media":"seekingalpha","summary":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and","content":"Summary\n<ul>\n <li>Poor subscriber growth in early 2021 caused by growth pulled forward into 2020.</li>\n <li>Margins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.</li>\n <li>Shares are priced for significant multiple compression - upside surprises are possible.</li>\n</ul>\n<img src=\"https://static.tigerbbs.com/8ec873de4bc2efed5978c4f64ba593c8\" tg-width=\"768\" tg-height=\"512\">Photo by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\n<img src=\"https://static.tigerbbs.com/d315bc9bc555100afa7df26727f62923\" tg-width=\"587\" tg-height=\"85\">Source: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\n<img src=\"https://static.tigerbbs.com/8ed6344c76098943f2fb99f9ca210014\" tg-width=\"599\" tg-height=\"263\">Source: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n<blockquote>\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n</blockquote>\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\n<img src=\"https://static.tigerbbs.com/e7a6a6a3fed1b72275f299c380f32268\" tg-width=\"640\" tg-height=\"37\">Source: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Where Will Netflix Stock Be In 2025</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhere Will Netflix Stock Be In 2025\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-04-23 21:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025>seekingalpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to ...\n\n<a href=\"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"NFLX":"奈飞"},"source_url":"https://seekingalpha.com/article/4420804-where-will-netflix-stock-be-2025","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1114827926","content_text":"Summary\n\nPoor subscriber growth in early 2021 caused by growth pulled forward into 2020.\nMargins and price increases, plus continued subscriber growth, drive significant business value increases to 2025.\nShares are priced for significant multiple compression - upside surprises are possible.\n\nPhoto by wutwhanfoto/iStock Editorial via Getty Images\nBenjamin Graham famously said that in the short run the market is a voting machine but in the long run it is a weighing machine. While some might consider it blasphemy to quote the father of value investing in a piece about Netflix (NFLX), I think the company is actually a perfect example of that premise. Over the long run, we can expect their share price to approximate the fair value of their business, so the logical thing to do is consider scenarios around the long-run potential value of the firm. There has recently been a great deal of discussion around their Q1 2021 results, as subscriber growth was markedly below 2020. The shares traded down on these results, but I think the long term business prospects are more important than the results of any one quarter.\nSize of the Business in 2025\nBy far the biggest factor that will affect the value of the business in the future is the number of subscribers they are able to generate.\nThis figure has historically been growing very fast, which is why Netflix, Inc. shares trade at the valuation they do. And that growth rate has actually been accelerating in recent years, as they have added more subscribers than the prior year four of the last five years.\nSource: Netflix 10-K\nGetting the future growth in subscribers right here is key to the valuation, and I prefer to be conservative rather than aggressive. Looking at the chart above showing subscriber growth, we can see that it has accelerated every year in the past five except 2019, when they added 27.8 million subscribers versus adding 28.6 million the year prior. In 2020 they had a big growth year, with subscribers up 36.6 MM, but that was probably affected by COVID-19 keeping people at home.\nThe key question is whether the lower additions in Q1 2021 (and lower forecast for additions in Q2 2021) are part of a new trend. I think by far the most likely reason for the lower subscriber numbers in the first half of 2021 is that demand was pulled forward. Most people who even considered subscribing to Netflix in 2020 probably did so given the significant extra time at home caused by the pandemic. That seems likely to have reduced the subscriber pool in early 2021. That said, I think the long term growth will continue.\nThe company is expanding its offering in many markets around the world, with locally produced content ramping up. This has a two-fold effect. First, it provides a local moat, as the company can provide Hollywood content with international appeal as well as local content. Secondly, regional content often has long-tail appeal in other places. As one example, the analyst from Fidelity they had on their most recentconference call(Nidhi Gupta) mentioned off-the-cuff that she is a big consumer of their Indian content. That is just one example of content produced regionally having appeal to users in higher income countries like the USA.\nNetflix is also generally believed to have very strong retention metrics, and in fact an analytics firmrecently foundthat visits to the company's cancellation page were down 20% year-over-year. So it seems that they are doing well retaining the additional subscribers they added during the pandemic. In fact, in the Q1shareholder letterthey said, \"We're also seeing how much members value Netflix with Q1'21 churn below Q1'20 levels, demonstrating that as we improve the service, we can charge a bit more.\" The fact that churn was down in Q1 is a great sign, in my opinion. They raised prices in many jurisdictions recently, and Q1 2020 is almost certainly a tough comparable for churn as the start of the pandemic likely improved retention significantly toward the end of that quarter.\nI'm going to assume for the purposes of valuing the firm that they are able to add a flat 28 million subscribers per year starting in Q3 2021. That resets them back from to their 2018/2019 levels, and assumes that growth flatlines from there.\nOne of the biggest objections from Netflix bears has been the potential for market saturation in North America. Growth in North America declined considerably in 2019 from 2018, with the overall growth staying approximately flat largely because of additions from other countries. The argument is always that foreign growth is less profitable because the price of Netflix is generally lower in lower income countries. I think that's a bit of a red herring, because they have still been able to grow average revenue per user each year.\nSource: Netflix 10-K\n2020 had a lower increase in average monthly revenue per paying membership because they didn't take aprice increase in the USAuntil very close to the end of the year. That price increase will flow through in 2021, which should give them a bump on average revenue per user this year.\nSo assuming they can add 28 million subscribers for each year starting in Q3 2021 and going to 2025 that implies a subscriber base of 334 million people at the end of 2025.\nRisk of Competition\nOne factor that could impact their ability to continue to grow is competition from other streaming services. There have been a number of launches and expansions of streaming services, and nearly all of the big media companies have a streaming service available in the US now. I think that is unlikely to be an issue, for a couple of reasons.\nThe first is that US consumers have demonstrated a willingness to pay way more than a Netflix account costs for entertainment. As more and more streaming options open up, there will be more people who finally cut the cord on their cable package. Those who hadn't cut the cord yet are potentially great Netflix customers. They are probably folks who are used to spending $60-$100 per month on video entertainment, so they can justify having 4+ streaming services. And they are probably a group with relatively higher inertia, so less likely to subscribe for a couple of months per year, catch up on shows, and then cancel. If the world ends up (as it looks right now) that most people have access to multiple streaming services, Netflix seems pretty likely to be on that list for the vast majority.\nThe other reason I think competition is unlikely to be a significant issue is that they have looked at it empirically. Reed Hastings (Netflix founder) shared this on the most recent conference call:\n\n And we really look through all the data, looking at different regions where new competitors are launched or not launched. And we just can't see any difference in our relative growth in those regions, which is what gives us confidence that it's intensely competitive\n\nIf the high profile launches of new streaming services weren't enough to change the growth trajectory in the markets they launched in, then it seems reasonable to assume they won't change the overall growth of NFLX dramatically.\nThe Catalyst of Operating Leverage\nThe company has been growing both its revenues and its expenses very quickly as it invests in new content for its subscription service. It's business model constantly requires new content investment, and I don't expect that to change. However, they are at the level where content costs can be distributed over so many subscribers that the cost per subscriber will begin to fall. We have already seen this will some of their other cost line items (especially marketing) and I think we will start to see it with content spend as well over the next few years, which has the potential to be very meaningful for margins.\nOperating margins have already been trending up (see table above) going from 10% in 2018 to 18% in 2020. And inQ1 of 2021operating margins were actually 27%! I don't think they'll be able to maintain that level for the entire year in 2021, but given the long term trend I think they'll easily be able to get there by 2025. A big contribution to the increased margins in Q1 was that the pandemic slowed down production in 2020, so they have less content beginning its amortization period in the early part of this year. They indicated they are once again producing in nearly all of their geographies, so content launches (and associated amortization) will increase significantly in the back half of the year. That should also help with subscriber growth.\nGiven the glide path of operating leverage and the power of increasing prices, I think they'll be able to get to those 27% operating margins on a sustainable basis by the end of 2025. They've already proved its possible in Q1, so even if they revert back a bit for the rest of 2021 continued operating leverage should get them there permanently by the end of 2025 if not sooner.\nNetflix Stock Forecast in 2025\nI think the way they get that operating margin sustainably up to 27% will be with price increases. They have been raising prices in all markets, but faster growth in markets where Netflix is sold at a lower cost has kept average revenue per user growth muted. It was up 6% in Q1, largely on the backs of a recent price increase. I also think they are getting more aggressive on price increases over time. Assuming 6% per year in improved revenue per subscriber seems reasonable to me. Starting from $10.81 at the end of 2020 and increasing by 3% per year for five years gets to $14.47 per user at the end of 2025. That is the final variable needed to model their operating income for 2025.\nSource: Author's Estimates\nTaking off $400 MM for interest payments (they have said they expect to keep $10-$15 billion in debt) and taxes at the statutory rate (which they've been able to reduce so far) gets us to a net income forecast of $12.1 billion for 2025. This is obviously deterministic, but does provide a starting point for a valuation. Even if we assume growth begins to slow post 2025 as they reach saturation, this will still be a very high quality business with significant pricing power. That would justify a 25X earnings multiple at that time, or a market capitalization of $303 billion. Assuming shares outstanding remains the same as the end of 2020 (with the recently announced buybacks only offsetting dilution) that implies a share price at the end of 2025 of $687.\nThat is a mid single digits return per year from here, which is unspectacular but reasonable. It also seems possible that the firm will be able to beat some of my estimates, particularly the operating margin one. If they can get that higher as a result of price increases and operating leverage it makes a meaningful difference to the potential upside.\nI've also assumed meaningful multiple compression over the next five years. If the market continues to value Netflix at a multiple well above the market in 2025, that is an additional source of upside.\nIs Netflix a Good Stock to Buy Now?\nThere is an old saying that the stock market climbs a wall of worry. In quarters when Netflix was growing subscribers quickly there was always concern about them outspending their free cash flow. Now they're generating so much revenue that they've become free cash flow positive to the point that they are launching a buyback. I think it is very likely the business will be able to resume growing after they digest the significant demand that was pulled forward in 2020, and I think continued price increases are also very likely to add material value to shareholders. Thus, recent weakness seems like an entry point for long-term oriented investors.","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":50,"commentSize":15,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}