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Netflix, Inc. (NASDAQ:NFLX) saw a decent share price growth of 15% on the NASDAQGS over the last few months. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Netflix’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
See our latest analysis for Netflix
What Is Netflix Worth?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 14% below our intrinsic value, which means if you buy Netflix today, you’d be paying a fair price for it. And if you believe the company’s true value is $801.56, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Netflix’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What does the future of Netflix look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 76% over the next couple of years, the future seems bright for Netflix. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? NFLX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on NFLX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.