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Based on the dollar value of an individual share or their market capitalization? Their current market capitalization (after the crash) is about $20 billion, whi

by bskap 12y ago

Based on the dollar value of an individual share or their market capitalization? Their current market capitalization (after the crash) is about $20 billion, which is less than $400 for each monthly subscriber they currently have. That's not too bad of a price, especially not for a company that's still growing at a rate of several million subscribers per quarter.

akbar501 12y ago
This is purely from a 30 second look, but if I had to make the case for Netflix being richly valued I'd go with: 1. Very high P/E ratio. Thus strong future growth is baked into price. So, a buyer of the stock today is already paying for strong growth. 2. Based on #1, the risk is higher as you're prepaying for future growth. And the future is uncertain. 3. Institutional ownership is already high, so you're more likely to see outflows than strong inflows. I don't like investing on this metric, but it does affect price during market fluctuations. 4. Price/Sales is high. 5. Low margin I don't trade much, but if I did I'd stay away due to the lack of shorts, thus no short squeeze to play. Of course, on the positive side it dominates its market, has strong growth, and generates free cash flow. Again, I did not do a genuine analysis so I could be way off on some of the above.
goodcanadian 12y ago
Based primarily on the extraordinarily high price to earnings ratio and the complete lack of anything resembling consistent earnings growth. Metrics like revenue and subscriber numbers don't mean much if they can't reliably make a profit off of them. Don't get me wrong; I do think that Netflix (or something like it) represents the future of content delivery and that there is incredible room for growth. Unfortunately, the potential upside is already priced into the shares. They may have a first mover advantage, but they do have competition (Hulu, Amazon, et cetera). I think they would be a decent speculative bet at a PE of 20, but not at a PE over 100.

by bskap 12y ago

akbar501 12y ago

This is purely from a 30 second look, but if I had to make the case for Netflix being richly valued I'd go with: 1. Very high P/E ratio. Thus strong future growth is baked into price. So, a buyer of the stock today is already paying for strong growth. 2. Based on #1, the risk is higher as you're prepaying for future growth. And the future is uncertain. 3. Institutional ownership is already high, so you're more likely to see outflows than strong inflows. I don't like investing on this metric, but it does affect price during market fluctuations. 4. Price/Sales is high. 5. Low margin I don't trade much, but if I did I'd stay away due to the lack of shorts, thus no short squeeze to play. Of course, on the positive side it dominates its market, has strong growth, and generates free cash flow. Again, I did not do a genuine analysis so I could be way off on some of the above.

goodcanadian 12y ago

Based primarily on the extraordinarily high price to earnings ratio and the complete lack of anything resembling consistent earnings growth. Metrics like revenue and subscriber numbers don't mean much if they can't reliably make a profit off of them. Don't get me wrong; I do think that Netflix (or something like it) represents the future of content delivery and that there is incredible room for growth. Unfortunately, the potential upside is already priced into the shares. They may have a first mover advantage, but they do have competition (Hulu, Amazon, et cetera). I think they would be a decent speculative bet at a PE of 20, but not at a PE over 100.