Analyst Note| Neil Macker, CFA |
Netflix ended an impressive 2020 with strong subscriber growth, beating our estimate and relatively conservative management guidance provided a quarter ago. Despite the subscriber beat, revenue was in line with our projections for the quarter. We still believe that the global rollout of Disney+ and the launches of Peacock and HBO Max will increase churn and pressure gross adds for Netflix over the near future. However, Netflix is tracking ahead of our previous expectations on free cash burn and margin expansion. As a result, we are raising our fair value estimate to $250 from $200. We continue to believe Netflix’s share price assumes unrealistic long-term growth and profitability.