1. Art and Diseño

February 1, 2015
NASDAQ: NFLX
NETFLIX INC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
NA
B-
C+
C
Annual Dividend Yield
NA
SELL
C-
D+
D
Beta
1.05
Sector: Consumer Goods & Svcs
NFLX BUSINESS DESCRIPTION
Netflix, Inc. operates as an Internet television
network, is engaged in the Internet delivery of TV
shows and movies directly on TVs, computers, and
mobile devices in the United States and
internationally.
Weekly Price: (US$)
D-
E+
E
E-
F
Market Capitalization
$26.8 Billion
52-Week Range
$299.50-$489.29
Sub-Industry: Internet Retail
SMA (50)
HOLD
RATING SINCE
10/16/2014
Price as of 1/29/2015
$443.80
Source: S&P
SMA (100)
1 Year
2 Years
500
450
400
350
300
STOCK PERFORMANCE (%)
3 Mo.
Price Change
17.37
1 Yr.
10.83
250
3 Yr (Ann)
53.05
200
150
GROWTH (%)
Last Qtr
26.33
72.17
70.88
12 Mo.
25.83
137.35
133.51
3 Yr CAGR
19.76
5.67
1.18
RETURN ON EQUITY (%)
NFLX
Q4 2014
14.36
Q4 2013
8.42
Q4 2012
2.30
Ind Avg
14.60
14.42
17.02
S&P 500
14.59
13.97
13.23
Revenues
Net Income
EPS
100
50
Rating History
HOLD
BUY
HOLD
BUY
HOLD
Volume in Millions
60
40
20
2013
2014
2015
0
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
P/E COMPARISON
RECOMMENDATION
We rate NETFLIX INC (NFLX) a HOLD. The primary factors that have impacted our rating are mixed - some
indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a
positive or negative performance for this stock relative to most other stocks. The company's strengths can
be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and expanding
profit margins. However, as a counter to these strengths, we also find weaknesses including weak operating
cash flow and generally higher debt management risk.
102.73
518.22
19.08
NFLX
Ind Avg
S&P 500
HIGHLIGHTS
The revenue growth came in higher than the industry average of 3.3%. Since the same quarter one year prior,
revenues rose by 26.3%. Growth in the company's revenue appears to have helped boost the earnings per
share.
2012
2013
Q4 1.35
Q3 0.96
Q2 1.15
Q1 0.86
Q4 0.79
Q2 0.49
The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500
and the Internet & Catalog Retail industry. The net income increased by 72.2% when compared to the same
quarter one year prior, rising from $48.42 million to $83.37 million.
Q3 0.52
Q1 0.05
Q4 0.13
Q3 0.13
Q2 0.11
Q1 -0.08
EPS ANALYSIS¹ ($)
2014
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the
market's overall trend during that period and the fact that the company's earnings growth has been robust.
We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative
to its industry tend to reduce its upside potential.
Despite currently having a low debt-to-equity ratio of 0.48, it is higher than that of the industry average,
inferring that management of debt levels may need to be evaluated further. Despite the fact that NFLX's
debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.60 is low and demonstrates weak
liquidity.
Net operating cash flow has significantly decreased to -$38.46 million or 192.80% when compared to the same
quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 1
February 1, 2015
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
PEER GROUP ANALYSIS
600%
Market Capitalization
$26.8 Billion
52-Week Range
$299.50-$489.29
Price as of 1/29/2015
$443.80
INDUSTRY ANALYSIS
The internet and catalog retailing industry includes 16,000 companies with combined annual revenue of over
$160 billion. Major companies include Lands’ End, LL Bean, Amazon.com (AMZN), Overstock.com (OSTK) and
Hanover Direct. The top 50 companies account for approximately 60% of total industry revenue. The catalog
retail sector consists of mail order, television and catalog channels while internet retail includes all services
through online channels. Demand is driven by consumer spending, which ties the profitability of companies to
their active customer base.
REVENUE GROWTH AND EBITDA MARGIN*
V
FA
ZU
Beta
1.05
AB
OR
UN
LE
AB
0%
R
VO
FA
Revenue Growth (TTM)
LE
Over the past five years, the industry pattern has shifted from catalog to internet sales. Internet sales have
been the driver for overall health of the internet & catalog industry as internet use has increased to over 70%
of US households. The evolution of secure user interfaces and the increased convenience of online shopping
are expected to drive growth in the coming quarters. In order to increase online sales, companies offer
reduced prices, free shipping and more variety. Although the broader retail industry is expected to remain
sluggish during the slow recovery from the US economic slowdown, the internet will help drive sales.
SFLY
-20% GRPN
AMZN
EXPE
OWW TRIP
PCLN
60%
NFLX
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $1 Billion and $144.4 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
V
FA
600%
AB
OR
PEER GROUP: Internet & Catalog Retail
LE
AB
0%
R
VO
FA
Revenue Growth (TTM)
LE
UN
SFLY
AMZN
-4%
GRPN
VIPS
CTRP
OWW PCLN
NFLX TRIP
EXPE
Catalog retailing has witnessed a dynamic shift in its business model from call-centers to websites. Many
catalog retailers have adapted their operations to the web as a result of a change in customer preferences.
Companies such as L.L. Bean and Lands’ End have succeeded with this strategy while also maintaining their
catalog operations. By doing so, they provide services to traditional catalog shoppers and enjoy a web
operation that helps keep fixed-costs down while attracting new customers. Catalogs are currently driving
more than half of internet sales.
The catalog industry shows a trend of sustained growth in multi-channel retailing. The two main channels,
namely direct-to-consumer (DTC) and store, will emerge from the convergence of catalog and internet sales.
The industry is expected to experience higher sales growth in the direct-to-consumer segment.
REVENUE GROWTH AND EARNINGS YIELD
ZU
US online retail has evolved from a fledgling industry to a mature, mainstream, and integrated industry with
multiple offline channels. However, the next phase of e-commerce growth will require retailers to innovate
and invest in technologies that optimize the connection between online and offline elements. Failure to
address risks associated with payment methods, credit card fraud and other consumer fraud could hamper
sales growth.
5%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between 8.3% and
539.5%. Companies with NA or NM values do not
appear.
Ticker
NFLX
EXPE
TRIP
CTRP
PCLN
GRPN
SFLY
AMZN
VIPS
ZU
OWW
Recent
Company Name
Price ($)
NETFLIX INC
443.80
EXPEDIA INC
86.57
TRIPADVISOR INC
68.00
CTRIP.COM INTL LTD
48.11
PRICELINE GROUP INC
1,014.74
GROUPON INC
7.34
SHUTTERFLY INC
44.48
AMAZON.COM INC
311.78
VIPSHOP HOLDINGS LTD -ADR
21.97
ZULILY INC
18.21
ORBITZ WORLDWIDE INC
9.48
Market
Cap ($M)
26,849
9,847
8,848
6,243
53,128
4,910
1,724
144,356
12,463
1,066
1,049
Price/
Earnings
102.73
27.05
46.90
61.68
22.90
NM
NM
NM
122.74
140.08
67.71
Net Sales
TTM ($M)
5,504.66
5,559.52
1,170.67
1,127.37
8,143.03
3,034.71
849.04
88,988.00
3,065.02
1,065.76
908.87
Net Income
TTM ($M)
266.80
426.85
210.27
120.62
2,348.00
-163.13
-63.86
-241.00
106.08
16.76
15.33
The peer group comparison is based on Major Internet Retail companies of comparable size.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 2
February 1, 2015
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
COMPANY DESCRIPTION
Netflix, Inc. operates as an Internet television network, is
engaged in the Internet delivery of TV shows and movies
directly on TVs, computers, and mobile devices in the
United States and internationally. The company operates
in three segments: Domestic Streaming, International
Streaming, and Domestic DVD. The company also
provides DVDs-by-mail membership services. As of May
21, 2014, it had approximately 48 million customers in
approximately 40 countries. The company was founded
in 1997 and is headquartered in Los Gatos, California.
NETFLIX INC
100 Winchester Circle
Los Gatos, CA 95032
USA
Phone: 408-540-3700
http://www.netflix.com
Beta
1.05
Market Capitalization
$26.8 Billion
52-Week Range
$299.50-$489.29
Price as of 1/29/2015
$443.80
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of NFLX shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR
SCORE
2.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, NFLX has a growth score better than 30% of
the stocks we rate.
strong
3.5
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 60% of the companies we
cover.
strong
4.0
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 70% of the companies we review.
strong
2.5
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 40% of the stocks we monitor.
strong
4.5
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 80% of the companies we analyze.
strong
0.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. This company
pays no dividends.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 3
February 1, 2015
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.64
Q1 FY15
3.38 E
5.45 E
2015(E)
2016(E)
Beta
1.05
Market Capitalization
$26.8 Billion
52-Week Range
$299.50-$489.29
Price as of 1/29/2015
$443.80
FINANCIAL ANALYSIS
NETFLIX INC's gross profit margin for the fourth quarter of its fiscal year 2014 is essentially unchanged when
compared to the same period a year ago. The company has grown sales and net income significantly,
outpacing the average growth rates of competitors within its industry. NETFLIX INC has weak liquidity.
Currently, the Quick Ratio is 0.60 which shows a lack of ability to cover short-term cash needs. The company's
liquidity has increased from the same period last year.
At the same time, stockholders' equity ("net worth") has greatly increased by 39.30% from the same quarter
last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q4 FY14
1,484.73
829.89
65.05
83.37
Q4 FY13
1,175.23
685.56
82.29
48.42
Q4 FY14
1,608.50
7,056.65
900.00
1,857.71
Q4 FY13
1,200.41
5,412.56
530.60
1,333.56
Q4 FY14
83.20%
55.89%
4.38%
0.78
3.78%
14.36%
Q4 FY13
81.50%
58.33%
7.00%
0.81
2.07%
8.42%
Q4 FY14
1.48
0.33
13.35
4.87
Q4 FY13
1.42
0.28
7.44
11.06
Q4 FY14
60
0.00
1.35
30.75
NA
2,231,330
Q4 FY13
60
0.00
0.79
22.37
NA
2,462,554
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 4
February 1, 2015
NASDAQ: NFLX
NETFLIX INC
Sector: Consumer Goods & Svcs Internet Retail Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
Beta
1.05
Market Capitalization
$26.8 Billion
52-Week Range
$299.50-$489.29
Price as of 1/29/2015
$443.80
2 Year Chart
$500
Price/Earnings
$400
NFLX 102.73
Peers 518.22
• Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
• NFLX is trading at a significant discount to its
peers.
HOLD: $361.70
HOLD: $348.89
HOLD: $169.12
BUY: $431.09
VALUATION
HOLD. The current P/E ratio indicates a significant discount compared to an average of 518.22 for the Internet
& Catalog Retail industry and a significant premium compared to the S&P 500 average of 19.08. For additional
comparison, its price-to-book ratio of 14.43 indicates a significant premium versus the S&P 500 average of
2.69 and a significant premium versus the industry average of 10.64. The price-to-sales ratio is well above
both the S&P 500 average and the industry average, indicating a premium.
BUY: $381.23
RATINGS HISTORY
Our rating for NETFLIX INC has not changed since
10/16/2014. As of 1/29/2015, the stock was trading at
a price of $443.80 which is 9.3% below its 52-week
high of $489.29 and 48.2% above its 52-week low of
$299.50.
$300
$200
2013
1
2
3
premium
4
5
2014
Price/Projected Earnings
MOST RECENT RATINGS CHANGES
Date
Price
Action
10/16/14
$361.70 Downgrade
7/22/14
$431.09
Upgrade
4/8/14
$348.89 Downgrade
1/27/14
$381.23
Upgrade
1/29/13
$169.12 No Change
1
2
3
premium
From
Buy
Hold
Buy
Hold
Hold
To
Hold
Buy
Hold
Buy
Hold
Price reflects the closing price as of the date listed, if available
(as of 1/29/2015)
47.87% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
1
2
3
22.83% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
4
5
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
NFLX NM
Peers 0.58
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• NFLX's negative PEG ratio makes this valuation
measure meaningless.
Earnings Growth
1
2
3
4
lower
5
higher
NFLX 133.51
Peers -29.43
• Higher. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• NFLX is expected to have an earnings growth rate
that significantly exceeds its peers.
Sales Growth
discount
NFLX 4.87
Peers 3.44
• Premium. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• NFLX is trading at a significant premium to its
industry.
3
NFLX 1626.65
Peers 160.30
• Premium. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• NFLX is trading at a significant premium to its
peers.
discount
NFLX 14.43
Peers 10.64
• Premium. A higher price-to-book ratio makes a
stock less attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
• NFLX is trading at a significant premium to its
peers.
Price/Sales
29.29% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
5
2
premium
discount
premium
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
4
NFLX 81.51
Peers 884.01
• Discount. A lower price-to-projected earnings ratio
than its peers can signify a less expensive stock or
lower future growth expectations.
• NFLX is trading at a significant discount to its
peers.
Price/Book
1
Price/CashFlow
discount
1
2
3
lower
4
5
higher
NFLX 25.83
Peers 44.32
• Lower. A sales growth rate that trails the industry
implies that a company is losing market share.
• NFLX significantly trails its peers on the basis of
sales growth
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 5