Netflix Presentation
Netflix Presentation
Netflix Presentation
CORPORATIVAS
Finanzas Corporativas
hosted by
Germán Estrada
Pontificia Universidad Católica del Perú
Business Description
Europe, Middle East,
U.S and Canada
and Africa (33%) Overview
(44%)
Business Model
New competitors have appeared in the last years such as Disney Plus,
HBO Max, Hulu, Apple TV and Amazon Prime Video threatening
Netflix's market share
Hulu $5.99
Netflix´s prices varies between $9 and $15 per month
Disney+ $8.00
Higher prices: Netflix and HBO Max
HBO Max $15.00 Lower prices: Disney Plus and Apple Tv+
Netflix $14.00
0 5 10 15
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
Investment thesis
The recommendation is based on three key value drivers:
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
Valuation
As we do not take videogames business into consideration, then a
multisegmented structure will not be required. The procedure is
EV/EBITDA Multiple
focused only in the streaming service' revenues to obtain the
We estimated a 13.63x EV/EBITDA multiple, which is below in
accurate and representative value of the Enterprise. For that, it was
comparison to other similar companies EV/EBITDA 2021. In
necessary to develop some drivers
contrast to the fundamental value, the relative valuation
indicates that the Fair Value is 13.74% higher compared to its
DFCFF model: Fundamental value Target Price.
Netflix will NOT recover its pandemic occupancy level, but will
decrease slightly until 2025 and then it will resume its expansion.
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
WACC Beta Damoradan
1 MODEL 2 BETA
Figure 21: Beta & WACC
Unlevered
Damodaran
Beta
0.91
0.977
New Beta
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
Investment Risks
Competition risk
Netflix competitors's strategies in pricing are really
attractive so this might affect Netflix in terms of new
potential customers
Netflix's disadvantage: They don´t generate revenues
from other businesses.Therefore, their main
competitors might attract more suscribers in the
upcoming days.
Content risk
One main issue is that Netflix highly rely on third-party
content for licensed shows and movies, even though
they have spent millions of dollars every year in original
content.
Objective: improve their original content so that
existing members don't cancel their service or new
members join their service.
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
Investment Risks
Slower membership growth
Membership growth is slower in countries where Netflix has
been operating for many years or where it is highly
penetrated.
Impact on valuation: If there is no membership growth,
Netflix revenues by region will be negatively affected.
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
Financial Analysis
Revenue Growth (MM. USD)
Revenues increased $13.9 billion between
2018 and 2021
Higher average paid memberships
Higher average monthly revenue per
paid membership
2018 2019 2020 2021
Revenue
15,794,341 20,156,447 24,996,056 29,697,844
Revenue Growth
27.6% 24.0% 18.8%
Highest growth in 2020 Highest growth in 2021 EBITDA increased from US$9,261,683 million to
US$18,633,288 million
Less spending on marketing Higher operating income
Growth in operating income
Administrative and technology and development Stable management of financial expenses: foreign
expenses grew at a slower rate than revenues exchange gains of $403 million 80.1% growth in depreciation and amortization of
property, equipment and intangibles in 2021
Profitability Analysis
Return on Equity
23.12% 24.62% 24.96% 32.28%
Good investments in money
Return on Invested
13.43% 13.61% 20.65% 21.52% market funds in 2020.
Capital
Source: Annual Report (2021), Team elaboration
Similar growth in equity and net
Highest variation in 2020 income
Increase in equity
Significant 76% increase in
Source: Annual Report (2021), Team elaboration Source: Annual Report (2021), Team elaboration
No bank loans
Financial debt is formed almost entirely by the long-term financial debt: Senior Notes.
Financial debt was affected upwards due to the issuance of Senior Notes in 2018, 2019
and 2020, but with a small downward correction in 2021.
Financial Analysis
& Business Description & Investment Risks & Risks Corporate Governance
Environment
Women's inclusion
Equitable and
inclusive wages
and benefits