Tuesday, September 07, 2004
Netflix, NFLX - Is it time to buy again?
Netflix(NFLX) is generating a lot of buzz with it's latest story on relationship with tivo. The result of the buzz is evident with the stock being up 15.9% on very heavy volume. 6.5M shares traded by noon eastern vs a avg daily volume of 2.5m shares.
Even after this near 20% bounce, the high flying stock is less than half of it's peak value of ~40$/share. The question to ask now - is it time to buy NFLX again?
Let's look deeper. @16.65$/share the market cap of NFLX is ~870M$. Take out ~150M in cash holdings and their enterprise value is about 720M. Compare that with the trailing twelve month revenue - 375M, we are looking at a decent multiple. But, in all honesty, who cares about the past revenue ? :)
Even though we have to take the analyst estimates with a pinch of salt, the estimates for calendar year 2004 are at 520M and for 2005 @ 830M. So if this company maintains the current EV/rev ratio of just under 2, we are looking at a valuation range of 1.4-1.5B$. That puts the stock price at around 32-33.
Time to get back into this stock again?
Comments:
your view of the market seems quite bullish, I feel it is overbought for the following reasons
1. economy is not growing fast enough
2. deficits are huge
3. cash from refinancing mortgages is drying up
4. semiconductor business is not doing good
5. Dow is up from 9800 to 10350 without any correction
6. no near term solution in iraq
I feel the market seems so strong because republicans seem to have the upper hand in the coming election, so the market may move up from here to Nov, but it's going to be lights out after Nov
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1. economy is not growing fast enough
2. deficits are huge
3. cash from refinancing mortgages is drying up
4. semiconductor business is not doing good
5. Dow is up from 9800 to 10350 without any correction
6. no near term solution in iraq
I feel the market seems so strong because republicans seem to have the upper hand in the coming election, so the market may move up from here to Nov, but it's going to be lights out after Nov
