If you look at the share price Netflix-Del (WKN: 552484) we can see that it is priced even higher at the moment. Currently, the price level is $ 167. However, not much is missing before we reach $ 157.
An analyst has now lowered its price target on the once glamorous streaming powerhouse to this even cheaper level. His verdict therefore reads: sell! The reasons for this are actually quite clear and have already been shared many times.
Netflix stock management needs to work on growth and profitability. In addition, as well as other claims, going into the advertising business can mean selling your own product. There is a lack of growth imagination. In addition, there is a need to invest massively in your own content.
Yes, there is something about it. But still: There is also the flip side of an opportunity. Especially if we reach the $ 157 level, which is not far off.
Netflix stock: Cheap today
One thing many analysts and investors forget right now when penalizing Netflix stocks is valuation. And the opportunity in a growth market. We should continue to assume that streaming is not dying. It just does not grow as fast in a time that we can describe as a reopening. In addition, the market is changing. Investors do not like uncertainty, we can see that now.
But hard facts show: Boy, are Netflix shares cheap! If the stock falls to a stock price of $ 157, it would be valued at only 13.6 times earnings on a 2021 basis. call me crazy But that would really be a value level.
In addition, the market value is already relatively low at only $ 75 billion. We must not forget that the group is a functioning ecosystem. As well as a pioneer in the streaming market, which still has around 220 million users. There is currently some weakness in growth that cannot be denied. But the operational basis is actually very strong.
So there is pessimism about Netflix shares. The growth and the need to always reinvest a large proportion partially justify this. But for me, the big thing is: the market is intact, the investments are future growth and sales potential. In addition, this streaming option is approaching a cheap valuation target with solid return potential. Especially when one suddenly realizes that growth is not coming any further.
Too much pessimism!
The market is pessimistic, so are the analysts. To me, giving the Netflix stock a price-to-earnings ratio of 13.6 on a 2021 basis is a clear indication of that. Whether that will eventually happen is another question. However, it would not even require 10% divestiture to reach that price level. In any case, this evaluation measure is interesting in a longer perspective. And as I said, we are not far from that.
Article Netflix stock: Only worth $ 157 ?! first appeared on The Motley Fool Germany.
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Vincent owns shares in Netflix. The Motley Fool owns shares in and recommends Netflix.
Broget Fool Germany 2022