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A NASDAQ-Listed Entertainment Major Trading at Appealing Levels - NFLX

Jan 25, 2022 | Team Kalkine
A NASDAQ-Listed Entertainment Major Trading at Appealing Levels - NFLX

Netflix, Inc.

NFLX Details


Netflix, Inc. (NASDAQ: NFLX) is one of the world's leading entertainment services, with over 222 million paid subscriptions in over 190 countries watching TV shows, documentaries, and feature films in a wide range of genres and languages. It streams original and third-party digital video content to PCs, Internet-connected TVs, and consumer electronics such as tablets, video game consoles, Apple TV, Roku, and Chromecast.


FY21 Results:

  • Boost in Revenues: The company has witnessed an 18.81% increase in revenues to USD 29.70 billion in FY21 (ended December 31, 2021) compared to USD 25.00 billion in FY20.
  • Improvement in Net Income: NFLX's net income increased to USD 5.12 billion in FY21, up from USD 2.76 billion in FY20.
  • Leveraged Balance Sheet: The company's cash and cash equivalents were USD 6.03 billion as of December 31, 2021, with total debt of USD 15.39 billion.

Key Risks:

  • Dependence on AWS: The company has designed its software and computer systems to take advantage of Amazon Web Services (AWS) data processing, storage, and other services. Any disruption or interference with the use of AWS would harm NFLX's operations and business operations.
  • Payment Processing Risk: NFLX uses both internal and third-party systems to process payments. Increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuance of payment cards, changes to payment rules or regulations, loss of payment partners, or disruptions or failures in its payment processing systems, could all harm the company's revenue, operating expenses, and cash flows.


  • FY22 Estimates: NFLX expects its FY22 operating margin to be in the range of 19-20% as of January 21, 2022, assuming no significant changes in foreign currency from present levels.


Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.



NFLX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

NFLX's stock price has fallen 47.04% in the past three months and made a new 52-week low today. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 9.07, indicating an oversold zone. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 434.28.

Considering the significant correction in the stock price, strong revenue track record, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 354.88, down 10.74% as of January 24, 2022, at 12:36 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

  • Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.