February 28, 2016
NASDAQ: NFLX
NETFLIX INC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
NA
B-
C+
C
Annual Dividend Yield
NA
SELL
C-
D+
D
Beta
1.66
Sector: Consumer Goods & Svcs
NFLX BUSINESS DESCRIPTION
Netflix, Inc., an Internet television network,
engages in the Internet delivery of television (TV)
shows and movies on various Internet-connected
screens. The Company operates in three segments:
Domestic streaming, International streaming and
Domestic DVD.
D-
Weekly Price: (US$)
E+
E
E-
F
Market Capitalization
$40.5 Billion
Sub-Industry: Internet Retail
SMA (50)
HOLD
52-Week Range
$58.46-$133.27
RATING SINCE
10/16/2014
Price as of 2/25/2016
$94.53
Source: S&P
SMA (100)
1 Year
2 Years
140
130
120
110
100
90
STOCK PERFORMANCE (%)
3 Mo.
Price Change
-23.87
80
1 Yr.
38.33
3 Yr (Ann)
54.53
12 Mo.
23.15
-54.04
-53.94
3 Yr CAGR
23.38
92.65
89.92
70
60
GROWTH (%)
50
Last Qtr
22.80
-48.21
-48.16
Revenues
Net Income
EPS
RETURN ON EQUITY (%)
NFLX
Q4 2015
5.51
Q4 2014
14.36
Q4 2013
8.42
Ind Avg
11.62
11.84
12.82
S&P 500
12.28
14.59
13.97
332.50
303.03
NFLX
Ind Avg
HOLD
Volume in Millions
200
100
2014
2015
0
2016
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
S&P 500
2014
Q4 0.10
Q2 0.06
Q3 0.07
Q1 0.05
Q4 0.19
Q3 0.14
Q2 0.16
The gross profit margin for NETFLIX INC is currently very high, coming in at 86.11%. It has increased from the
same quarter the previous year. Along with this, the net profit margin of 2.36% is above that of the industry
average.
Q1 0.12
Q4 0.11
Q3 0.07
Q1 0.01
BUY
HIGHLIGHTS
The revenue growth significantly trails the industry average of 53.9%. Since the same quarter one year prior,
revenues rose by 22.8%. This growth in revenue does not appear to have trickled down to the company's
bottom line, displayed by a decline in earnings per share.
21.53
EPS ANALYSIS¹ ($)
Q2 0.07
BUY HOLD
RECOMMENDATION
We rate NETFLIX INC (NFLX) a HOLD. The primary factors that have impacted our rating are mixed - some
indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a
positive or negative performance for this stock relative to most other stocks. The company's strengths can
be seen in multiple areas, such as its robust revenue growth, expanding profit margins and solid stock price
performance. However, as a counter to these strengths, we also find weaknesses including feeble growth in
the company's earnings per share, deteriorating net income and generally higher debt management risk.
P/E COMPARISON
2013
40
Rating History
2015
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Compared to its closing price of one year ago, NFLX's share price has jumped by 38.34%, exceeding the
performance of the broader market during that same time frame. Setting our sights on the months ahead,
however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is
now relatively expensive compared to the rest of its industry. The implication is that its reduced upside
potential is not good enough to warrant further investment at this time.
Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of
weakness within the company. When compared to other companies in the Internet & Catalog Retail industry
and the overall market, NETFLIX INC's return on equity is below that of both the industry average and the S&P
500.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 1
February 28, 2016
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
PEER GROUP ANALYSIS
Market Capitalization
$40.5 Billion
52-Week Range
$58.46-$133.27
Price as of 2/25/2016
$94.53
INDUSTRY ANALYSIS
The internet and catalog retailing industry includes 16,000 companies with combined annual revenue of over
$160 billion. Major companies include Lands’ End, LL Bean, Amazon.com (AMZN), Overstock.com (OSTK) and
Hanover Direct. The top 50 companies account for approximately 60% of total industry revenue. The catalog
retail sector consists of mail order, television and catalog channels while internet retail includes all services
through online channels. Demand is driven by consumer spending, which ties the profitability of companies to
their active customer base.
125%
REVENUE GROWTH AND EBITDA MARGIN*
QUNR
V
FA
AB
OR
JD
Beta
1.66
UN
R
VO
FA
0%
LE
AB
Revenue Growth (TTM)
LE
Over the past five years, the industry pattern has shifted from catalog to internet sales. Internet sales have
been the driver for overall health of the internet & catalog industry as internet use has increased to over 70%
of US households. The evolution of secure user interfaces and the increased convenience of online shopping
are expected to drive growth in the coming quarters. In order to increase online sales, companies offer
reduced prices, free shipping and more variety. Although the broader retail industry is expected to remain
sluggish during the slow recovery from the US economic slowdown, the internet will help drive sales.
TRIP
-60%
AMZN
NFLX
EXPE
PCLN
60%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $4.7 Billion and $261.4 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
US online retail has evolved from a fledgling industry to a mature, mainstream, and integrated industry with
multiple offline channels. However, the next phase of e-commerce growth will require retailers to innovate
and invest in technologies that optimize the connection between online and offline elements. Failure to
address risks associated with payment methods, credit card fraud and other consumer fraud could hamper
sales growth.
Catalog retailing has witnessed a dynamic shift in its business model from call-centers to websites. Many
catalog retailers have adapted their operations to the web as a result of a change in customer preferences.
Companies such as L.L. Bean and Lands’ End have succeeded with this strategy while also maintaining their
catalog operations. By doing so, they provide services to traditional catalog shoppers and enjoy a web
operation that helps keep fixed-costs down while attracting new customers. Catalogs are currently driving
more than half of internet sales.
The catalog industry shows a trend of sustained growth in multi-channel retailing. The two main channels,
namely direct-to-consumer (DTC) and store, will emerge from the convergence of catalog and internet sales.
The industry is expected to experience higher sales growth in the direct-to-consumer segment.
125%
REVENUE GROWTH AND EARNINGS YIELD
QUNR
V
FA
PEER GROUP: Internet & Catalog Retail
AB
OR
JD
LE
CTRP
UN
R
VO
FA
0%
LE
AB
Revenue Growth (TTM)
VIPS
-12%
AMZN NFLXTRIP
EXPE
PCLN
6%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between 9.3% and
123.3%. Companies with NA or NM values do not
appear.
Ticker
NFLX
TRIP
PCLN
VIPS
LVNTA
LVNTB
QUNR
JD
AMZN
CTRP
EXPE
Recent
Company Name
Price ($)
NETFLIX INC
94.53
TRIPADVISOR INC
62.05
PRICELINE GROUP INC
1,263.41
VIPSHOP HOLDINGS LTD -ADR
11.33
LIBERTY VENTURES
36.05
LIBERTY VENTURES
35.55
QUNAR CAYMAN ISLANDS -ADR 37.12
JD.COM INC -ADR
24.93
AMAZON.COM INC
555.15
CTRIP.COM INTL LTD
41.22
EXPEDIA INC
105.13
Market
Cap ($M)
40,467
8,219
62,687
5,655
5,111
5,111
4,714
27,787
261,388
18,560
14,485
Price/
Earnings
332.50
45.63
25.42
29.82
22.67
22.36
NM
NM
447.70
45.55
18.28
Net Sales
TTM ($M)
6,779.51
1,492.00
9,223.99
5,567.91
1,147.00
1,147.00
541.83
25,854.79
107,006.00
1,586.70
6,672.32
Net Income
TTM ($M)
122.64
198.00
2,551.36
230.10
194.00
194.00
-468.22
-353.64
596.00
346.19
764.47
The peer group comparison is based on Major Internet Retail companies of comparable size.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 2
February 28, 2016
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
COMPANY DESCRIPTION
Netflix, Inc., an Internet television network, engages in
the Internet delivery of television (TV) shows and movies
on various Internet-connected screens. The Company
operates in three segments: Domestic streaming,
International streaming and Domestic DVD. It offer
members with the ability to receive TV shows and
movies streaming content, including original series,
documentaries, and feature films through a host of
Internet-connected screens, such as TVs, digital video
players, TV set-top boxes, and mobile devices. The
company also provides DVDs-by-mail membership
services. It serves approximately 75 million members in
190 countries. Netflix, Inc. was founded in 1997 and is
headquartered in Los Gatos, California.
NETFLIX INC
100 Winchester Circle
Los Gatos, CA 95032
USA
Phone: 408-540-3700
http://www.netflix.com
Beta
1.66
Market Capitalization
$40.5 Billion
52-Week Range
$58.46-$133.27
Price as of 2/25/2016
$94.53
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of NFLX shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR
SCORE
2.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, NFLX has a growth score better than 30% of
the stocks we rate.
strong
4.0
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 70% of the companies we
cover.
strong
3.0
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 50% of the companies we review.
strong
4.0
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 70% of the stocks we monitor.
strong
5.0
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 90% of the companies we analyze.
strong
0.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. This company
pays no dividends.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 3
February 28, 2016
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.03
0.25 E
1.10 E
Q1 FY16
2016(E)
2017(E)
Beta
1.66
Market Capitalization
$40.5 Billion
52-Week Range
$58.46-$133.27
Price as of 2/25/2016
$94.53
FINANCIAL ANALYSIS
NETFLIX INC's gross profit margin for the fourth quarter of its fiscal year 2015 is essentially unchanged when
compared to the same period a year ago. Even though sales increased, the net income has decreased,
representing a decrease to the bottom line. NETFLIX INC has weak liquidity. Currently, the Quick Ratio is 0.65
which shows a lack of ability to cover short-term cash needs. The company's liquidity has increased from the
same period last year.
During the same period, stockholders' equity ("net worth") has increased by 19.68% from the same quarter last
year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q4 FY15
1,823.33
1,056.04
59.89
43.18
Q4 FY14
1,484.73
829.89
65.05
83.37
Q4 FY15
2,310.72
10,202.87
2,400.36
2,223.43
Q4 FY14
1,608.50
7,056.65
929.60
1,857.71
Q4 FY15
86.11%
57.91%
3.28%
0.66
1.20%
5.51%
Q4 FY14
83.20%
55.89%
4.38%
0.78
3.78%
14.36%
Q4 FY15
1.54
0.52
35.43
1.69
Q4 FY14
1.48
0.33
13.35
4.87
Q4 FY15
428
0.00
0.10
5.20
NA
19,421,988
Q4 FY14
423
0.00
0.19
4.39
NA
20,027,062
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 4
February 28, 2016
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
RATINGS HISTORY
Our rating for NETFLIX INC has not changed since
10/16/2014. As of 2/25/2016, the stock was trading at
a price of $94.53 which is 29.1% below its 52-week
high of $133.27 and 61.7% above its 52-week low of
$58.46.
$150
HOLD: $51.67
BUY: $61.58
HOLD: $49.84
2 Year Chart
$100
$50
2014
2015
MOST RECENT RATINGS CHANGES
Date
Price
Action
10/16/14
$51.67 Downgrade
7/22/14
$61.58
Upgrade
4/8/14
$49.84 Downgrade
2/25/14
$64.72 No Change
From
Buy
Hold
Buy
Buy
To
Hold
Buy
Hold
Buy
Price reflects the closing price as of the date listed, if available
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
(as of 2/25/2016)
32.19% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
35.29% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
32.52% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
Beta
1.66
Market Capitalization
$40.5 Billion
52-Week Range
$58.46-$133.27
Price as of 2/25/2016
$94.53
VALUATION
HOLD. NETFLIX INC's P/E ratio indicates a significant premium compared to an average of 303.03 for the
Internet & Catalog Retail industry and a significant premium compared to the S&P 500 average of 21.53. For
additional comparison, its price-to-book ratio of 18.19 indicates a significant premium versus the S&P 500
average of 2.56 and a significant premium versus the industry average of 14.18. The price-to-sales ratio is well
above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these
and other key valuation criteria, NETFLIX INC proves to trade at a premium to investment alternatives within
the industry.
Price/Earnings
1
2
3
premium
4
5
NFLX 332.50
Peers 303.03
• Average. An average P/E ratio can signify an
industry neutral price for a stock and an average
growth expectation.
• NFLX is trading at a valuation on par with its peers.
Price/Projected Earnings
1
2
3
premium
4
5
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
NFLX NM
Peers 1.32
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• NFLX's negative PEG ratio makes this valuation
measure meaningless.
Earnings Growth
1
2
3
4
lower
5
higher
NFLX -53.94
Peers 198.29
• Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• However, NFLX is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth
discount
NFLX 5.97
Peers 3.43
• Premium. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• NFLX is trading at a significant premium to its
industry.
3
NFLX NM
Peers 20.41
• Neutral. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• NFLX's P/CF is negative making the measure
meaningless.
discount
NFLX 18.19
Peers 14.18
• Premium. A higher price-to-book ratio makes a
stock less attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
• NFLX is trading at a significant premium to its
peers.
2
premium
discount
NFLX 86.33
Peers 108.49
• Premium. A higher price-to-projected earnings ratio
than its peers can signify a more expensive stock
or higher future growth expectations.
• NFLX is trading at a significant premium to its
peers.
Price/Book
1
Price/CashFlow
discount
1
2
3
lower
4
5
higher
NFLX 23.15
Peers 24.75
• Average. Comparing a company's sales growth to
its industry helps to determine if the company is
adding or losing market share.
• NFLX is keeping pace with its peers on the basis of
sales growth.
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 28, 2016
PAGE 5