Netflix Inc. (Nasdaq: NFLX) going to stay on the sidelines compared to HBO in terms of subscribers, but this does not diminish her to increase the market value.
Improving the profitability of NFLX
The company expects an improvement in profitability in the 4th quarter on the basis of an increase in revenue with stable costs. No new countries connecting, therefore, we are expecting an increase in the number of subscribers not by 2 million, as in the reporting quarter, but only on 1 million.
To maintain profitability, the company needs to increase the number of subscribers by 6 million per year. Over the nine months of this year, the 7 million subscribers, and therefore we can expect an increase in profitability by the end of the year.
Number of NFLX Subscribers
Evaluating NFLX by Subscriber Count. The number of subscribers has grown from 33,27 million in 2012 year before 40,28 million.
Search data is less important to Netflix due to increased brand awareness and mobile app adoption, but outside the US from the end 2012 of the year 3 million new subscribers (of them 1 million based on search queries) - good for all multipliers.
In emerging economies, the better for the NFLX, the less penetration of smartphones and smart TV. There is also an obvious disadvantage., lack of familiarity with the brand, therefore, progress there is slow, but it goes. At the end of the year, the number of NFLX subscribers may reach 42 million, out of which 32 million will be in the US and 10 million in other countries.
Competition with HBO
Need to mark, that HBO's Game of Thrones searches are still much more common than Netflix-exclusive content searches. But the NFLX exclusive has already overtaken HBO's Underground Empire and caught up with the top Homeland series from Showtime and Spartacus from Starz..
NFLX has no product, capable of replacing "Game of Thrones" - a fantasy series based on the cycle of novels "A Song of Ice and Fire". The second series about the fictional world of medieval Europe will not be the same. There, fantastic creatures in general will not be like that., and especially dragons. But still she will not forget, that Game of Thrones is a big budget, but from the point of view of investors (not Netflix viewers) it is needed least of all.
Important, that there are fewer searches on the topic of unsubscribing from Netflix, which was especially popular at the end 2012 of the year.
In addition, it should be noted, that Netflix is becoming a competitor to Youtube in terms of views.
NFLX financial performance
Nefliks reporting presentation can be viewed here:
For investors, the main indicators are still non-financial. So, Netflix showed in the reporting quarter 5 billion hours of streaming video.
Nevertheless, the company itself is doing its best to maintain a positive profit and not spend cash., how it differs from most in the entertainment industry.
The NFLX leadership insists, that this year the company did not use part of the funds. But she is in no hurry with international expansion, first of all, just so as not to feel restrictions on access to funding. Netflix Tops Are Satisfied With That, that producers can get money for a specific project.
To determine the target level, we consider the forecasts for the entire 2013 year, based on this year's average. We value shares by 30 projected earnings from US sales per diluted share 296 dollars plus 4 earnings per share for the international segment (43,2 dollar) a plus 8 earnings per share from DVD segment (57,9 dollar). We get the target level 397,7 dollar.
by Mikhail Krylov
