NFLX – Market expectations are for Uniform ROA improvement, but management may have concerns about growth, cash flow, and value

November 11, 2020

  • Netflix, Inc. (NFLX:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 47.3x Uniform P/E, implying bullish expectations for the firm. However, management may have concerns about membership growth, free cash flow, and their ability to deliver value
  • Specifically, management may have concerns about their ability to effectively compete for customers’ time and satisfy their customers, and they might have concerns about their engagement and churn rates assessment in Canada and Australia. In addition, they may lack confidence in their ability to execute their marketing strategy and get people talking about their shows. Furthermore, they may be downplaying concerns about their dependency on the App Store for discovery, and they may be concerned about their ability to sustain membership growth and improve free cash flow. Finally, they may be overstating the potential of working with certain animators