Thank you very much for this kind comment! The graphics are done by the second person of the "we" I always mention, so that's encouraging and appreciated! :)
i find some of your assumptions optimistic (e.g. just changing growth of 2.5% on terminal value to 2% could drop the MoS by 3%) - but i guess assumptions are always debatable.
in general - i thing the collapsing viewership in TV and cinema - indicates that this is not a market that will grow. I don't know what those who were born in. 2020 would watch in 2035 - but i think there's a good chance it will be generated for them rather than streamed and i'm not sure netflix's moat means much in such a world.
Thank you for the comment, Daniel. In my view, 2.5% is a reasonable base-case assumption for a global, price-setting subscription and advertising platform. Terminal g reflects long-run nominal FCF growth, not subscriber growth. A 2.0% terminal g effectively assumes inflation-only growth and near-zero real expansion forever. Given Netflix’s global revenue mix, enduring pricing power, and continued ad monetisation at scale, I believe a modest premium to a strict ‘mature utility’ anchor is justified.
It is a matter of assumptions, of course. Just like the view of the moat, where I also have a different opinion. :)
My biggest concern with the business is the record rise of piracy in 2025. Obviously it will continue to expand, and may disrupt NFLX, especially since some of those piracy sites have professional UI’s
Piracy rising is a real headwind, but it’s not a Netflix killer in my opinion. It mainly limits marginal pricing power and accelerates churn in certain cohorts, which I already haircut via conservative ARPU and terminal assumptions in the analysis. I believe convenience and product experience will still win for mainstream users.
Thank you for the detailed analysis. I feel your growth rates are on the optimistic side: Damodaran predicts the sector growth to be 8.5% in the next two years and then plateauing to 7.2% for the next five years which feels reasonable: the growth factor is expected to decrease, specifically as the business matures in the US with a lot of people already having subscriptions and main income growth would arrive from increase in subscription costs (similar to SPOT), along with significant investment in content to stay ahead in the streaming market business. Unless it cultivates its ad business well, its growth story feels too over-valued IMHO.
I read your valuation analysis on r/ValueInvesting and have enjoyed learning a lot. I am more bearish on the stock currently, will definitely see how the WBD deal works out and start buying if the stock drops <70.
Thanks for the analysis. The graphic design of your slides is among the most beautiful here on Substack.
Thank you very much for this kind comment! The graphics are done by the second person of the "we" I always mention, so that's encouraging and appreciated! :)
thanks for the detailed breakdown.
i find some of your assumptions optimistic (e.g. just changing growth of 2.5% on terminal value to 2% could drop the MoS by 3%) - but i guess assumptions are always debatable.
in general - i thing the collapsing viewership in TV and cinema - indicates that this is not a market that will grow. I don't know what those who were born in. 2020 would watch in 2035 - but i think there's a good chance it will be generated for them rather than streamed and i'm not sure netflix's moat means much in such a world.
Thank you for the comment, Daniel. In my view, 2.5% is a reasonable base-case assumption for a global, price-setting subscription and advertising platform. Terminal g reflects long-run nominal FCF growth, not subscriber growth. A 2.0% terminal g effectively assumes inflation-only growth and near-zero real expansion forever. Given Netflix’s global revenue mix, enduring pricing power, and continued ad monetisation at scale, I believe a modest premium to a strict ‘mature utility’ anchor is justified.
It is a matter of assumptions, of course. Just like the view of the moat, where I also have a different opinion. :)
Great analysis!
My biggest concern with the business is the record rise of piracy in 2025. Obviously it will continue to expand, and may disrupt NFLX, especially since some of those piracy sites have professional UI’s
Thank you!
Piracy rising is a real headwind, but it’s not a Netflix killer in my opinion. It mainly limits marginal pricing power and accelerates churn in certain cohorts, which I already haircut via conservative ARPU and terminal assumptions in the analysis. I believe convenience and product experience will still win for mainstream users.
Thank you for the detailed analysis. I feel your growth rates are on the optimistic side: Damodaran predicts the sector growth to be 8.5% in the next two years and then plateauing to 7.2% for the next five years which feels reasonable: the growth factor is expected to decrease, specifically as the business matures in the US with a lot of people already having subscriptions and main income growth would arrive from increase in subscription costs (similar to SPOT), along with significant investment in content to stay ahead in the streaming market business. Unless it cultivates its ad business well, its growth story feels too over-valued IMHO.
I read your valuation analysis on r/ValueInvesting and have enjoyed learning a lot. I am more bearish on the stock currently, will definitely see how the WBD deal works out and start buying if the stock drops <70.
I’m of and remember when they were a couple guys on Los Gatos CA mailing disks! Sold out just like the rest!