Will Netflix (NFLX) collapse?

People will wonder if Netflix (NFLX) could collapse because of all the competition in the streaming market.

Nobody knows how many streaming services are out there, but there are a lot of them. For example, Americans can choose from Netflix, Amazon Prime, Peacock, Disney, Hulu, Paramount+, and many free-add supported television (FAST) offerings.

However, Netflix (NASDAQ: NFLX) is still the king of streaming. For example, Statista estimates Netflix (NFLX) had 230.75 million subscribers worldwide in the 4th quarter of 2022. Comparatively, Disney+ had 164.2 million subscribers worldwide in the 4th quarter of 2022.

Netflix is Still the King of Streaming

Conversely, Disney’s growth exceeds Netflix’s. Netflix’s worldwide subscriptions grew by 8.91 million from 221.84 million in the 4th quarter of 2021. In contrast, Disney’s global subscribers grew by 46.1 million from 118.1 million in the 4th quarter of 2021.

Netflix (NFLX) is still far ahead of the largest FAST, Paramount Global’s Pluto TV. The number of Pluto Monthly Active Users grew from 64 million in the fourth quarter of 2021 to 72 million in the 4th quarter of 2022, Statista estimates.

A Free Ad Supported Television service is a streamer that shows programs for free. Advertising in the shows pays for the FASTs. FASTs are popular because they offer many programming choices with no subscription.

Hence, Netflix is still the king of streaming. However, competition is growing. I think FASTs, such as Pluto and Amazon’s Freevee, are the biggest threat to Netflix. Yet I think it will take several years for FASTs to grow large enough to pose a direct threat to Netflix. Netflix’s moat is still large, but it is shrinking.

Is Netflix (NFLX) making money?

Netflix (NFLX) makes some money. It reported a $2.448 billion quarterly gross profit on 31 December 2022.

That quarterly gross profit fell from $3.137 billion on 30 September 2022 and $2.470 billion on 31 December 2021. In contrast, Netflix’s quarterly income from $631.77 million on 31 December 2021 and $1.533.02 billion on 30 September 2022 to $549.30 million on 31 December 2022.

Hence, Netflix makes less money. Yet its revenues are growing. The quarterly revenues grew from $7.709 billion on 31 December 2021 to $7.852 billion on 31 December 2022.

Yet Netflix’s quarterly revenue growth fell from 16.03% on 31 December 2021 to 1.85% on 31 December 2022, Stockrow estimates. Cynics will wonder if Netflix’s revenue growth is unsustainable.

How much money is Netflix (NFLX) making?

Netflix (NFLX) generates some cash from its streaming. It reported a quarterly operating cash flow of $443.86 million on 31 December 2022. The quarterly operating cash flow grew from -$403.27 million on 31 December 2021.

Netflix burns cash. It reported a quarterly ending cash flow of -$969.73 million on 31 December 2022. The quarterly ending cash flow rose from -$1.497 billion on 31 December 2021. Yet, Netflix can generate enormous amounts of cash. It reported a quarterly ending cash flow of $6.034 billion on 31 March 2022.

On the bright side, Netflix is not borrowing much money. It reported a quarterly financing cash flow of $6.71 million on 31 December 2022. The quarterly financing cash flow grew from -$136.02 million on 31 December 2021.

How Much Value and Debt does Netflix (NFLX) Have?

Appealingly, Netflix’s total debt fell from $18.117 billion on 31 December 2021 to $14.353 billion on 31 December 2022.

Netflix has less debt, but its cash and short-term investments grew slightly. Netflix had $6.028 billion in cash and short-term investments on 31 December 2021 that grew to $6.058 billion on 31 December 2022.

The value is also growing. Netflix’s total assets grew from $44.585 billion on 31 December 2021 to $48.595 billion on 31 December 2022. Thus, Netflix has more value.

Yet I don’t consider Netflix a value investment because Mr. Market overvalues it. For instance, he paid $351.11 for Netflix on 30 January 2023. The share price fell from $427.14 on 31 January, 2022.

I recommend investors avoid Netflix because there are better streaming stocks out there. For example, Paramount Global (PARA) Mr. Market paid $22.61 for PARA on 30 January 2023. Another good Netflix alternative is Disney (DIS) Mr. Market paid $107.59 for Disney on 30 January 2023.

Netflix is growing, but it Mr. Market overprices it. I think smart investors will avoid Netflix and seek cheaper alternatives in the streaming space.