Netflix (NFLX) is rising to new highs as linear television dies. For example, Mr. Market paid $411.69 on 31 October 2023. People will ask if Netflix is worth $411.69?
Perhaps, Netflix was the largest streaming TV service, with 247.15 million paid subscribers worldwide in the third quarter of 2023, Statista estimates. Netflix’s paid subscriber number rose from 238.39 million in the second quarter of 2023, 223.09 million in the second quarter of 2022, 212.56 million in the third quarter of 2021, and 195.15 million in the third quarter of 2020.
Netflix had 77.32 million subscribers in the US and Canada in the third quarter of 2023, Statista estimates. However, Netflix’s largest region was Europe, the Middle East, and Africa, with 83.76 million subscribers. Plus, Netflix had 43.65 million subscribers in Latin America and 42.43 million subscribers in the Asia-Pacific Region in the third quarter of 2023.
Linear TV is dead
The September 2023 aggregated ratings data proves linear TV is dead. For example, America’s most “popular TV network” was a streaming service: Amazon’s Prime Video.
Prime Video had a September 2023 aggregated audience of 14.435 million, National Media Spots calculated. Comparatively, the largest broadcast network, NBC, had a September 2023 aggregated audience of 4.162 million. Meanwhile, the most popular cable network, ESPN, had a September 2023 aggregated audience of 2.745 million.
Thus, Netflix and Amazon (AMZN) have won the television wars. Streaming services have replaced cable and broadcast television (linear TV) as America’s entertainment medium. When ordinary people reach for the remote, it is the streaming remote.
Therefore, to many viewers, Netflix is television. Other companies like Disney (DIS), Paramount, and even the mighty Amazon (AMZN) are imitating Netflix’s business model.
Is Netflix the Largest Streaming service?
However, Netflix (NFLX) was the second largest subscription streaming TV service in the US in the first half of 2023.
Netflix had 21% of the US subscription streaming market, Statista estimates. In contrast, Amazon Prime was the largest US subscription streaming service with 20% of the market. Warner Bros Discovery’s (WBD) Max was the third largest with 15%.
However, the fastest segment of the US streaming market is free-ad-supported-television (FAST) services. FAST services work like other streamers, but they are free to all consumers. Instead of subscriptions, FASTs make money by selling advertising like traditional commercial television.
One-in-three US viewers subscribes to a FAST, Samba TV estimates. The fastest growing FAST was Amazon’s Freevee, which saw its viewership grow by 11% between 2022 and 2023, TechCrunch reports.
Tellingly, Amazon putting hundreds of Prime Video titles on Freevee. Freevee is also adding 23 ad-supported channels from Warner Bros and MGM. Other popular FASTS include Paramount’s Pluto and Fox’s Tubi. Pluto’s viewership grew by 7% and Tubi’s viewership grew by 6% between 2022 and 2023.
I think Netflix will need to add FAST channels to survive in the United States.
How Much Money is Netflix (NFLX) Making?
Netflix (NFLX) is making more money from its streaming service. For example, Netflix’s quarterly revenues grew from $7.926 million on 30 September 2022 to $8.542 billion on 30 September 2023. Thus, Stockrow estimates Netflix’s revenues grew by 7.77% in the quarter ending on 30 September 2023.
Similarly, Netflix’s quarterly gross profit grew from $3.137 billion on 30 September 2022 to $3.161 billion on 30 September 2023. Meanwhile, the quarterly operating income grew from $1.533 billion on 30 September 2022 to $1.916 billion on 30 September 2023.
Importantly, Netflix (NFLX) has more cash. Its quarterly operating cash flow grew from $556.81 million on 30 September 2022 to $1.992 million on 30 September 2023. Thus, Netflix’s quarterly operating cash flow grew by over 25% in one year.
How Much Cash is Netflix Generating?
However, the quarterly ending cash flow fell from $295.90 million on 30 September 2022 to -$309.43 million on 30 September 2023.
Yet, Netflix can generate enormous amounts of cash. There was a $6.738 billion quarterly ending cash flow on 31 March 2023. Plus, Netflix’s cash and short-term investments grew from $6.114 billion on 30 September 2022 to $7.867 billion on 30 September 2023.
However, Netflix pays enormous amounts of debt. There was a -$2.475 billion quarterly financing cash flow on 30 September 2023. The quarterly financing cash flow fell from $4.11 million on 30 September 2022. Yet, Netflix’s total debt fell from $14.222 billion on 30 September 2022 to $13.901 billion on 30 September 2023.
Netflix is not worth $411.69
However, I don’t think Netflix was worth $411.69 on 31 October 2023. To explain, Netflix had $49.502 billion in Total Assets on 30 September 2023. The Total Assets grew from $47.562 billion on 30 September 2022 but fell from $50.817 billion on 30 September 2023.
I see nothing in Netflix’s financial numbers can justify the $411.69 share price. Mr. Market grossly overprices Netflix. Yes, Netflix’s growth is impressive.
However, Netflix has not achieved the value to justify a $410 share price. Hence, I advise investors to avoid Netflix until it falls to a realistic price. I suspect the popularity of Netflix’s service boosts the stock’s price.
People like Netflix’s streaming videos, so they buy its stock. However, the financial numbers cannot support the share price Mr. Market gives Netflix. My advice is to watch Netflix’s videos but avoid its overpriced stock.