Netflix (NFLX) Valuation in Focus as Landmark Boxing Event Signals Broadening Live Sports Strategy

If you have been watching Netflix (NFLX) lately, you are not alone. More than 41 million viewers tuned in for the recent historic men's championship boxing match. The event, distributed in partnership with Joe Hand Promotions, quickly became the most-watched boxing match of the century and underscores Netflix’s leap into live sports. For investors, this milestone is worth a close look, as it not only signals growing demand for live events on the platform but also strengthens Netflix’s push to diversify its content and revenue streams.

This entry into major sporting events comes on the back of several strategic changes, including the rollout of ad-supported subscription tiers that have added a new dynamic to its business model. While competitive pressures remain high in the streaming space, with rivals eyeing similar moves into live sports, the momentum appears to be building for Netflix. Its shares have climbed 70% over the past year and remain well ahead on a year-to-date basis. It's a sharp contrast to the slight pullback after last quarter’s earnings, suggesting the market is reacting positively to recent developments and growing confidence in Netflix’s evolving strategy.

After such a strong run and with Netflix breaking into new territory, the real question now is whether the current price reflects the company’s future growth or if, perhaps, there is still value for investors looking to buy in.

Most Popular Narrative: 50% Overvalued

According to MichaelP, the current Netflix share price is trading well above what the narrative considers fair value. This reflects the market’s optimism and perhaps heightened expectations for future growth.

"I believe there is a greater chance than not, where due to the lack of profitable scale from their DTC offerings, these smaller streaming players may consider re-leasing more of their content library back to the likes of bigger streamers to generate a good return on the content and IP. We’re already seeing some of this occur. Smaller streaming platforms will likely realise there’s no point in owning great content and IP if you can’t monetise it profitably with your own smaller streaming platforms. So Netflix now holds the leverage over smaller content owners who don’t have the same scale."

Curious why this narrative values Netflix so much lower than the market? Discover which unexpected financial drivers, beyond subscriber numbers, shape this bold valuation call. The analysis challenges the consensus with unique, quantitative growth and margin assumptions that could signal major shifts. Want the full inside story? Keep reading for the critical projections and see what could be missing from the market’s euphoric pricing.

Result: Fair Value of $797 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing strikes within the entertainment industry and unexpected shifts in global competition could quickly challenge Netflix’s current growth outlook and market leadership.

Find out about the key risks to this Netflix narrative.

Another View: SWS DCF Model

While the user-driven valuation suggests Netflix is trading well above fair value, our SWS DCF model comes to a similar conclusion, indicating the shares are also overvalued based on future cash flow projections. However, does either approach truly capture the full growth story ahead?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Netflix for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Netflix Narrative

If these perspectives do not quite fit your own, or you want to dive deeper into the numbers yourself, you can easily craft a narrative based on your findings in just a few minutes. Do it your way

A good starting point is our analysis highlighting 2 key rewards investors are optimistic about regarding Netflix.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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