February 11, 2019

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


  • Netflix, Inc. (NFLX:USA)¬†currently trades well above historical averages relative to UAFRS-based (Uniform) Earnings, with a 65.1x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about original content investments, price increases, and third-party content agreements
  • Specifically, management may be concerned about the impact of content investments on cash flow, ROIC, and margins, and may be overstating the quality of their original content. Additionally, they may lack confidence in their ability to offset amortization and marketing cost pressures with price increases. Moreover, they may be concerned about long-term content agreements and their ability to purchase third-party content
To read this Embedded Expectations Analysis report in its entirety, please log into the Valens Research web app. If you don't have an account, you can sign up for the 30-day trial.