Quote:
Originally Posted by reckless
In fiscal year ending 2016 Netflix earned $20 in free cash flow.
As a point of comparison Netflix earned $10 in 2012, $12 in 2013, $14 in 2014 and $14.50 in 2015. It's been a money machine from jump street, and continues more so today.
If you buy Netflix now at $160, you are paying 8 times free cash flow (FCF). A great bargain for a great growing company. It's been a long term hold of mine for many years.
I have as my own estimate Netflix generating $23 FCF in 2018, and $25 in 2019.
At 8 times FCF, Netflix is worth about $185 in '18, and $200 in 2019.
At 10 times FCF, we're looking at $230 and $250, respectively.
I am told 15 times FCF is considered a 'fair' valuation for a public company. I have never in my adult life paid 15 times or more FCF for a company, btw.
So, at 15 times FCF, the 'fair' intrinsic value of Netflix is $300 right now; $345 next year and $375 in 2019.
One of the great bargains in today's market.
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Per this article, this guy says Netflix struggles with free cash flow. Huh?
https://seekingalpha.com/article/408...ns-growth-ends
Quote:
Summary
Netflix has struggled with producing Free Cash Flow.
The Negative Free Cash Flow model has, however, produced great subscriber growth.
Netflix has a range of options to create a strong cash flow positive endgame.
Netflix (NASDAQ:NFLX) has been called everything. From the best investment for the future to a bubble in search of a pin. Just last week I addressed one growing concern that Netflix was not amortizing its content quickly enough. I analyzed the numbers and I thought it was doing a wonderful job, and perhaps was being too hard on itself. Still, the bigger issues remain. The cash flow statement looks atrocious.
Source: Netflix Annual reports
This is in spite of the income statement showing consistently positive earnings.
In fact, Netflix itself recognizes this issue and you can find it emphasizing this in its financial statement disclosures.
Yes. Straight from the horse's mouth. Warnings aside, one must be cognizant of the fact that Netflix has produced very large membership growth with this negative cash flow.
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All I know is that Netflix has the luxury of letting you and your ISP carry the workload for all that bandwidth. I've read where in some areas Netflix is over half of the internet traffic from homes. Not sure how long that honeymoon lasts, with the competition between ISPs cutting margins to the bone.
As a side note, I tried Netflix for a couple of months, and was disappointed in their selection, especially of classic movies. Their original content didn't impress me either, but based on their subscription numbers, I must be an outlier.
