Image Source: Unsplash
 

Each week we run a DCF (Discounted Cash Flow) model on a company from our watchlist. This week’s pick: Netflix, Inc. (NFLX).
 

Profile

Netflix is the world’s leading subscription video-on-demand platform, with a global subscriber base exceeding 260 million. Its scale provides strong recurring revenue, while content investments continue to drive both user engagement and international growth. Despite rising competition from Disney+, Amazon Prime Video, and others, Netflix maintains a pricing advantage and global reach. The company has also started investing in gaming and advertising-supported tiers to diversify revenue streams. Challenges include heavy ongoing content spend, fluctuating free cash flow, and debt management.
 

DCF Analysis

Inputs

• Discount Rate: 10%
• Terminal Growth Rate: 3%
• WACC: 10%

Forecasted Free Cash Flows (in billions USD)

• 2025: $9.0B → PV: $8.18B
• 2026: $9.5B → PV: $7.85B
• 2027: $10.0B → PV: $7.52B
• 2028: $10.5B → PV: $7.20B
• 2029: $11.0B → PV: $6.90B

Total Present Value of FCFs = $37.65B

Terminal Value Calculation

Using perpetuity growth model with 2029 FCF = $11.0B:

TV = (11.0 × 1.03) ÷ (0.10 − 0.03) = 161.9B

Present Value of Terminal Value = $101.75B

Enterprise Value

Enterprise Value = 37.65B + 101.75B = $139.40B

Net Debt

• Cash: $9.58B
• Total Debt: $15.58B
• Net Debt = $6.00B

Equity Value & Per-Share Value

• Equity Value = 139.40B − 6.00B = $133.40B
• Shares Outstanding: ~428M
• Intrinsic Value per Share = $312

Conclusion

• DCF Value: $312
• Current Price: ~$1,200
• Margin of Safety: –74%

While Netflix has strong recurring revenues, global scale, and rising free cash flow, its stock currently trades far above our conservative DCF estimate. This suggests investors are pricing in stronger growth or higher profitability than our base case. For value-focused investors, NFLX appears overvalued under these assumptions.

More By This Author:

Constellation Brands, Inc.: Our Calculation Of Intrinsic Value
Crocs: Undervalued Footwear Giant With Cash Flow Strength
Why Top Investors Are Buying Nvidia Corp.