February 7, 2018

NFLX – Market expectations are for expanding Uniform ROA, but management has concerns about costs, investments, and pricing


    • Netflix, Inc. (NFLX:USA)¬†currently trades at historical highs relative to UAFRS-based (Uniform) Earnings, with a 74.6x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about costs, investments, and pricing
    • Specifically, management may be concerned about high expected content spend in 2019 and 2020, and may be downplaying concerns about the magnitude of write-downs as a result of the societal reset around sexual harassment. Additionally, they may be exaggerating the success of their investment strategy and its impact on results. Moreover, they may have concerns about their ability to raise prices efficiently going forward, as well as their ability to continue growing globally
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