How much is Netflix worth in 2024? $US100bn

Subscriber growth outside the U.S. has been Netflix’s primary revenue driver over the past decade, requiring significant cash investment in content.

I estimate a current DCF equity valuation of US$100bn for Netflix, driven by two key factors:

1. Potential for increasing international subscription prices; and
2. Annual content spend required to attract and retain subscribers.

Sections:

1. Netflix subscriber metrics
2. Netflix content spending
3. Netflix DCF valuation

1. Netflix subscriber metrics

Netflix is already in most U.S. households. That is why the strategy has been international expansion, which has been very successful.

Netflix has successfully doubled average revenue per subscriber in the U.S. over the past decade by increasing prices. However, in international markets, the focus remains on subscriber growth, not higher revenue per subscriber.

Going forward, the main revenue driver for Netflix will be its capacity to increase pricing in international markets without impacting subscriber churn.

2. Netflix content spending

Historically, Netflix has spent big on content. Before COVID, Netflix on average reinvested 90% of its streaming revenues back into content each year across both original and licensed content.

Post COVID, Netflix has been decreasing content expenditure, growing revenues and increasing free cash flows.

Since COVID, Netflix has increased pricing per U.S. subscriber by close to 50% while cutting global content spend per subscriber by 50%. The simple question is, how long can it get away with this before impacting subscriber numbers.

Netflix's original content, despite being extensive, lacks the lasting brand recall and rewatch value of Disney's catalogue or shows like Friends and Seinfeld.

For example, Disney's Frozen ($150m budget) and Netflix's The Gray Man ($200m budget) show that while Netflix movies see big spikes in interest, they often don't maintain long-term attention.

3. Netflix DCF valuation

I estimate a DCF equity valuation of US$100bn for Netflix today. This makes the following base case assumptions:

• Subscribers: grow from 261 to 376m between 2024-2034 driven by international
• ARPU monthly: grows from $11.9 to $15.0 conservative growth driven by larger proportion of lower income international markets in particular India, LATAM and Asia
• EBITDA margins: excluding content spend remain largely unchanged at 65%
• Content spend: increases from a decade low of 37% in 2023 to average 45% of revenues going forward
• No other bets: no contribution from future successful ventures like gaming or theme parks

Netflix DCF equity valuation

Scenario analysis

The table below shows how Netflix's DCF equity valuation changes with ARPU and content spend as a percentage of revenue. Higher pricing and lower spending create maximum value, while lower pricing and higher spending decrease value.

As of July 2024, Netflix's market cap is around US$300bn. This implies Netflix can increase ARPU above $18 globally, cut content spend to a record low of 30% of revenues, and generate an additional +$85bn in business value beyond streaming.