SOTP Analysis Suggests Netflix (NFLX) is Trading at a ~25% Discount - Piper Jaffray

September 6, 2016 8:24 AM EDT
Get Alerts NFLX Hot Sheet
Price: $140.18 +5.19%

Rating Summary:
    33 Buy, 23 Hold, 9 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 22 | Down: 32 | New: 34
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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.

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $97.38 yesterday.

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Piper Jaffray, Michael Olson

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