Is Netflix (NFLX) really losing money?

Rumors of Netflix’s losses are exaggerated. Financial data disproves the headlines about Netflix (NFLX) losses.

For example, Netflix’s quarterly gross profit grew from $2.47 billion on 31 December 2021 to $3.583 billion on 31 March 2022. Similarly, Netflix’s quarterly operating income grew from $631.77 million to $1.972 billion in the same period.

Additionally, Netflix’s quarterly revenues grew from $7.709 billion to $7.868 billion in the first three months of 2022. Stockrow estimates Netflix’s revenues grew by 9.84% in the quarter ending on 31 March 2022.

Netflix (NFLX) falls to Earth

Mr. Market, however, thinks Netflix (NASDAQ: NFLX) is losing value. For example, Netflix’s share price fell from $226.19 on 20 April 2022 to $188.54 on 27 April 2022.

Moreover, Netflix’s share price fell from $687.40 on 16 November 2021. Hence, Netflix’s shares lost $498.86 in value in six months.

So why is Netflix share value collapsing? I think Mr. Market finally grasps Netflix’s true share value. I believe Netflix was never worth $687.40. Instead, I think Netflix is worth somewhere between $100 and $200.

Hence, Mr. Market is paying a realistic price for Netflix. That means Netflix could be becoming a bargain stock.

Is Netflix a Bargain Stock?

I think Netflix (NFLX) retains enormous value. For example, Netflix had 221.64 million subscribers worldwide in the first quarter of 2022, Statista estimates.

However, Netflix’s subscriber base fell from 221.84 million in the first quarter of 2022, Statista calculates. Hence, Netflix’s growth has stopped.

Yet, 221.64 million people are still willing to pay $9.99, $15.49, or $19.99 a month for Netflix subscriptions. Hence, Netflix can generate enormous amounts of float from subscriptions.

Float is Warren Buffett’s term for cash a company generates from mandatory payments such as subscriptions. Buffett built Berkshire Hathaway (NYSE: BRK.B) with float from insurance premiums, utility bills, and newspaper subscriptions, for instance.

Thus, some value investors will wonder if Netflix is a bargain stock? My answer is no. I do not think Netflix will be a bargain until the share price falls below $100.

Is Netflix (NFLX) a value investment?

Many people will wonder if Netflix (NFLX) is a value investment? Netflix has some value characteristics.

For example, Netflix reported a quarterly ending cash flow of $6.034 billion on 31 March 2022. Similarly, Netflix reported a quarterly operating cash flow of $922.84 million on 31 March 2022.

Netflix’s cash is growing. The quarterly operating cash flow grew from -$403.27 million on 31 December 2021. Plus, the quarterly ending cash flow rose from -$1.498 billion on 31 December 2021.

Impressively, Netflix generated that cash while paying its debts. Netflix reported a quarterly financing cash flow of -$686.32 billion on 31 March 2022. Consequently, Netflix’s total debt fell from $18.117 billion on 31 December 2021 to $17.3 billion on 31 March 2022.

However, Netflix has less cash. Netflix’s cash and short-term investments fell from $8.404 billion on 31 March 2021 to $6.028 billion on 31 December 2021 to $6.009 billion on 31 March 2022.

Netflix is a cash-rich company but it has less cash.

What Value does Netflix Offer?

However, Netflix (NFLX) is adding value. For example, Netflix’s Total Assets grew from $40.123 billion on 31 March 2021 to $44.585 billion on 31 December 2021 to $45.331 billion on 31 March 2022.

Thus, Netflix is a growing cash-rich company that is adding value. Consequently, I think Netflix now resembles a value investment. The streaming giant has value characteristics.

Yet Netflix faces challenges including growing competition. Some of those competitors are withholding popular content from Netflix,  for example Paramount’s Star Trek shows and Disney’s Marvel programming. Disney (DIS) and Paramount Global (PARA) smartly confine their popular content to their streaming services.

However, Netflix (NFLX) has some huge advantages in the streaming video market. Those advantages include a massive platform, the ability to create or identity popular new programming (such as Squid Game), and a popular and well-respected brand.

Thus, Netflix could soon evolve from overpriced tech stock to value investment. Hence, value investors need to examine Netflix.

NFLX has some drawbacks. For example, Netflix(NFLX) pays no dividend. Appealingly, the falling stock price could drive Netflix’s to offer a dividend.

Investors need to watch Netflix because it could soon enter value territory.