Netflix, Inc. (NFLX): Our Calculation of Intrinsic Value

Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist.

This week’s pick: Netflix, Inc. (NFLX).

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Profile

Netflix is the world’s leading streaming entertainment platform, offering a global subscription service for movies, TV series, and original content.

The company operates a direct-to-consumer subscription model, generating revenue through monthly fees rather than advertising (though it has recently introduced an ad-supported tier).

Netflix’s business model is driven by:

• Subscriber growth and retention
• Pricing power across global markets
• Continuous investment in original content

Netflix’s competitive advantages include:

• A global subscriber base with strong brand recognition
• Scale in content production and distribution
• Data-driven content strategy improving engagement
• Increasing pricing power as streaming matures

Netflix has transitioned from a high-growth, cash-burning company into a high-margin, cash-generating platform.

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DCF Analysis

Inputs:

• Discount Rate: 9%
• Terminal Growth Rate: 3%
• WACC: 9%

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Forecasted Free Cash Flows (in billions USD)

(Reflecting continued margin expansion and moderate subscriber growth)

• 2025: $9.5 → PV: $8.7
• 2026: $10.2 → PV: $8.6
• 2027: $11.0 → PV: $8.5
• 2028: $11.8 → PV: $8.4
• 2029: $12.5 → PV: $8.2

Total Present Value of FCFs = ~$42.4B

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Terminal Value Calculation

Using perpetuity growth model with 2029 FCF = $12.5B:

TV = (12.5 × 1.03) ÷ (0.09 − 0.03)
TV ≈ $214.6B

Present Value of Terminal Value ≈ $139.6B

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Enterprise Value

Enterprise Value = $42.4B + $139.6B = $182.0B

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Net Debt

• Cash & Equivalents: ~$9.0B
• Total Debt: ~$14.5B

Net Debt ≈ $5.5B

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Equity Value & Per-Share Value

• Equity Value = $182.0B − $5.5B = $176.5B
• Shares Outstanding: ~4.3B

Intrinsic Value per Share ≈ $40–42

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Conclusion

• DCF Value: ~$41
• Current Price: ~$93
• Margin of Safety: ~–55%

Netflix has evolved into a high-margin global streaming leader with strong pricing power and growing free cash flow. Growth is now driven more by margin expansion, monetization (including ads), and content efficiency than subscriber gains.

However, valuation remains elevated, with the market pricing in continued growth and strong execution. Under conservative assumptions, NFLX appears overvalued.

At current levels, returns will likely depend on margin expansion, ad-tier success, and international growth rather than multiple expansion.