Fundamental AnalysisGlobal

Netflix Fundamental Research

What is the national economic outlook?

How well are we recovering from the pandemic? [Medium🟠]

  • US Real GDP increased at an annualized rate of 2.0% from the second to the third quarter of 2021. This was a substantial deceleration from the 6.7% growth in the second quarter.
  • Though it is likely that this will not continue, there is considerable evidence that the slowdown was due to two important factors: supply chain disruption and the outbreak of the delta variant of the virus. For now, the delta variant is reducing. In addition, there is reason to expect that supply chain disruption will wane over time as demand for goods lessens and supply constraints in Asia ease.
  • Regarding inflation, with supply chain issues being resolved, inflation will decelerate and hence the current inflation will turn out to be transitory.
  • Change in purchasing power [High 🟢]
  • According to Trading Economics global macro models and analysts expectations, the United States’ GDP per capita is expected to reach 60500.00 USD by the end of 2021. Using econometric models, the United States GDP per capita is projected to trend around 61100.00 USD in 2022. Hence the purchasing power in the country is expected to remain high.

What is the industry outlook?

What is the current industry category for the company?

  • Technology & Entertainment industry, mass media.

What are the growth prospects? [High 🟢] 

  • Revenue in the Video Streaming (SVoD) segment is projected to reach US$70,845m in 2021.
  • Revenue is expected to show an annual growth rate (CAGR 2021-2025) of 11.25%, resulting in a projected market volume of US$108,508m by 2025.
  • In global comparison, most revenue will be generated in the United States (US$32,082m in 2021).
  • The average revenue per user (ARPU) in the Video Streaming (SVoD) segment is projected to amount to US$65.68 in 2021.
  • In the Video Streaming (SVoD) segment, the number of users is expected to amount to 1,423.0m users by 2025.
  • User penetration will be 14.3% in 2021 and is expected to hit 18.2% by 2025.

What is the competitor landscape? [Medium🟠]

  • Netflix still rules the streaming world. There was 207.6 million total paying subscribers at the end of March, with about 67 million in the United States.
  • Although its main competitors – Disney+, HBO Max, Paramount+, and AppleTV+, as well as the old-guard streamers Amazon Prime Video and Hulu – have cut into Netflix’s share of viewers’ attention.
  • Netflix CFO Spencer Neumann said in a conference call: “Covid19 has accelerated this major shift from linear entertainment to streaming.” 

What is the company profile?

  • Business Overview
    • Netflix is a subscription-based streaming service that allows its members to watch TV shows and movies on any internet-connected device without commercials.
    • You can also watch TV shows and movies without an internet connection by downloading them to your iOS, Android, or Windows 10 device.


  • How are company financials changing?[High🟢 ]
Netflix Research Report
Netflix Research Report
  • Q3, 2021 
    • After a lighter-than-normal content slate in Q1 and Q2 due to COVID-related production delays in 2020, Netflix is seeing the positive effects of a stronger slate in the second half of the year. In Q3, it grew revenue 16% year over year to $7.5 billion, while operating income rose 33% vs. the prior-year quarter to $1.8 billion. they added 4.4m paid net adds in Q3 21 (vs. 2.2m in Q3’20) to end the quarter with 214m paid memberships. 
    • Revenue growth in Q3 was driven by a 9% and 7% increase in average paid streaming memberships and ARM, respectively. Excluding a foreign exchange (FX) impact of +$128m, ARM rose 5% year over year. Operating margin for Q3 amounted to 23.5%, a three percentage point increase vs. the year-ago period.
  • What are the stand-alone future financial prospects and future pipelines? [Medium to High🟢]
    • Netflix’s commitment to providing meaningful and differentiated video content partnerships to its existing customers.
    • Netflix has confirmed that it is expanding its video game library, despite a drop in subscriber growth.
    • According to the company, people with existing subscription plans will be able to add games at no additional cost.
    • According to a source familiar with the situation, the plan will offer video games on Netflix’s streaming platform within the next year. The games will be shown alongside current programming as a new genre, similar to how Netflix did with documentaries and stand-up specials.
Netflix Research Report
  • Beyond the numbers – ProCapitas Think Tank 🧠
    • Now let’s look at Netflix Inc. with a different view beyond numbers. The market and economy come out to be favorable for the media industry amid COVID and it has a positive impact on Netflix. 
    • If we look at its PE ratio then it can be said that Netflix is trading at a premium as compared to the industry. Netflix has tough competition like Apple Tv+, HULU, Amazon, Disney where competitive prices, revenue, and the content will play a vital role.  The recent success of Squid Games from Netflix has increased its subscribers and the stock price made its record high. It has to keep up with the unique content and its reasonable prices to attract more subscribers worldwide, not only in the US. 
    • The percentage increase in its revenue vs net income will be a key factor in its future valuation which makes Netflix an interesting stock to watch next year. 

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