To anyone who has ever curled up on the sofa and binge-watched Squid Game, Tiger King or Bojack Horseman, Netflix (US:NFLX) needs no introduction. The US giant practically invented video streaming as we know it and has signed up a quarter of a billion subscribers to its enormous library of films, TV shows and documentaries. In doing so, the company has made a lot of money and generated a healthy return for those who invested early. Today, the promise of even greater returns has driven its share price to dizzying heights.
- Market leader
- Profit-making and high margins
- Price assumes exceptional growth
- Fierce competition
- North American subscribers flat
- Macroeconomic headwinds
However, while we do not believe Netflix is a bad company, there are many reasons to question whether it will be as successful an investment over the next decade. FactSet-compiled consensus forecasts suggest Netflix will grow its subscriber base from 247mn as of 30 September this year to over 316mn by the end of 2027, a 28 per cent jump. Much of the stock’s valuation is based on the assumption it will do so handily, while increasing average user revenues and boosting profits.