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Netflix's Stock Is Still Worth $110

Written by: Trefis 04/25/12 - 12:58 PM EDT
Tickers in this article: NFLX
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- While Netflix's(NFLX) first-quarter 2012 earnings results were promising, the revenue outlook was weaker than consensus analyst estimates thus resulting in stock plunging.

Nevertheless, the subscriber trends seem to have improved and the overall subscriber outlook for 2012 is better than previously estimated. The downside is that long-term subscriber expansion ability is in doubt and there is hardly any indication that Netflix's content costs will come down notably.

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Consequently, we have reduced our price estimate for Netflix's stock to $110. Netflix competes with other streaming service providers such as Amazon(AMZN) , Dish Network's(DISH) Blockbuster, Comcast's(CMCSA) Xfinity Streampix, Hulu and others.

See our complete analysis for Netflix

Streaming Growth Back, DVD Losses Tapering Off

Netflix added over 1.7 million net domestic streaming subscribers. This figure pales in comparison to Q1 2011 subscriber additions but stands head to head with Q1 2010 figure. If we compare it to the last two quarters, it is a huge jump.

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The company has been able to partially recover from the damage it faced last year when it announced a significant pricing change. Netflix has acknowledged that it may take another couple of years for the company to fully recover from that damage. Nevertheless things are looking better as of now in our view.