SOTP Analysis Suggests Netflix (NFLX) is Trading at a ~25% Discount - Piper Jaffray
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Piper Jaffray analyst Michael Olson said a sum-of-parts analysis suggest Netflix (NASDAQ: NFLX) is trading about 25% below fair value. The firm reiterated an Overweight rating and price target of $122.
Olson said while Netflix has hit some hurdles on a path towards becoming the dominant worldwide source for streaming content, the long-term trajectory continues to be in a positive direction, in their view.
In the firm's NFLX sum-of-the-parts valuation, they assigned a multiple to each segment (intl streaming, domestic streaming, and DVD) based on a comp group that coincides with each segment's growth rate and underlying secular tailwinds (streaming) or headwinds (DVD). Based on this analysis, and assuming net debt position of $0 by 2020, they find a 2020 enterprise value of ~$80B; discounting back 3 years at 10%/yr points to a $122 value, in-line with the price target generated by their current valuation methodology.
Shares of Netflix closed at $97.38 yesterday.
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