Can Netflix (NFLX) make money from streaming video?

The current financial numbers show Netflix (NFLX) can make money from streaming video.

For example, Netflix reported a quarterly gross profit of $3.358 billion on 31 March 2023. However, that quarterly gross profit fell from $3.583 billion on 31 March 2022. Similarly, Netflix’s quarterly operating income fell from $1.972 billion on 31 March 2022 to $1.714 billion on 31 March 2023.

In contrast, Netflix’s quarterly revenues grew from $7.868 billion on 31 March 2022 to $8.162 billion on 31 March 2023. Notably, Netflix’s revenues grew by 3.73% in the quarter ending on 31 March 2023. However, the quarterly revenue growth rate fell from 9.83% on 31 March 2022.

Hence, Netflix is making less money than last year. Yet its growth is continuing at a lower level.

Can Netflix’s Growth Continue?

Netflix’s subscriber growth is continuing. For example, Netflix’s worldwide subscriber base grew from 221.64 million in the first quarter of 2022 to 232.5 million in the second quarter of 2023, Statista estimates.

Hence, I calculate Netflix added 11.1 million subscribers worldwide in 2022. Netflix’s bet on the growth of streaming video is paying off.

Moreover, Netflix added 7.66 million subscribers in the fourth quarter of 2022, The Hollywood Reporter estimates. However, Netflix lost almost 200,000 subscribers in North America and one million worldwide in the first quarter of 2023, Statista estimates.

The largest Netflix region is Europe, the Middle East, and Africa which had 77.37 million subscribers in the first quarter of 2023, Netflix calculates. US and Canada was number two with 74.4 million subscribers, Latin America was number three with 41.25 million subscribers, and the Asia -Pacific region was fourth with 39.48 million subscribers in the first quarter of 2023.

Is Netflix’s Growth Slowing?

Thus, Netflix (NFLX) is growing but not in its home market of the United States. I think aggressive competition from Disney+ and Paramount+ and Free Ad Supported Television (FAST) services is hurting Netflix in North America.

Notably, FASTs such as Paramount’s Pluto and Amazon’s FreeVee now offer hundreds of movies and TV shows for free. The number of Pluto Monthly Active Users grew from 54 million in the third quarter of 2021 to 72 million in the third quarter of 2022, Statista estimates.

Moreover, an enormous of content, including Disney and Marvel movies and Paramount products such as Star Trek and Top Gun: Maverick is no longer available on Netflix.

I think Netflix’s future is clear. That future is shrinkage in North America and growth in Europe, Africa, and the Middle East.

How Much Cash is Netflix Generating?

Netflix (NASDAQ: NFLX) is generating more cash. For example, the quarterly operating cash flow grew from $922.84 million on 31 March 2022 to $2.179 billion on 31 March 2023.

Similarly, the quarterly ending cash flow grew from $6.035 billion on 31 March 2022 to $6.738 billion on 31 March 2023. Plus, the cash and short-term investments grew from $6.009 billion on 31 March 2022 to $7.828 billion on 31 March 2023.

However, Netflix is paying off less debt. For example, the quarterly financing cash flow rose from -$686.32 million on 31 March 2022 to -$374.07 million on 31 March 2023.

Notably, Netflix’s total debt shrank slightly from $14.866 billion on 31 March 2022 to $14.038 billion on 31 March 2023. Hence, Netflix has more cash and stable debts looks healthy.

Is Netflix a Value Investment?

I don’t consider Netflix (NFLX) a value investment because of the stock price. I think Mr. Market overpriced Netflix at $321.15 on 26 April 2023.

Netflix is not worth $321.15 because it had $49.490 billion in Total Assets on 31 March 2023. The total assets grew from $45.331 billion on 31 March 2023.

Moreover, I do not think the financial numbers support the rise in Netflix’s share price from $209.91 on 25 April 2022. I consider Netflix an overpriced stock that is getting more expensive.

My advice is to wait until they split the stock to buy Netflix. Mr. Market overprices Netflix and its platform faces subscription losses because of growing competition. Investors need to stay away from Netflix, although Netflix’s programming is still entertaining.