My Valuation for Netflix From Almost 5 Years ago
Netflix (NFLX) surged more than 5% after its Q1 earnings. Not only did revenue grow almost 13%, EPS also beat expectations by nearly 17%.
Time to rewind, review and reflect on some valuations I did from almost 5 years ago.
The main valuation approach I used here is Residual Income Model, Free Cash Flow Model and EBITDA multiple Model are only used for cross-check.
Residual Income Model yields the most reliable outcome in estimating Netflix’s current value. Given Netflix's gradually stabilised earning and the fact that the largest proportion of the equity value comes from its book value. Therefore, the share price calculated using this RI approach is subject to less estimation error.
- Current share price (as of 22nd May 2020) = $429.32
- Estimated share price using RI approach = $498.34
In conclusion, Netflix is currently undervalued as of 22nd May 2020 and my recommendation is: BUY.
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