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Netflix (NASDAQ:NFLX) posted results that beat expectations and the stock moved up significantly. With this article I will try to model Netflix's growth for the coming year. For Q1 2014, I have used Netflix's guidance wherever possible (dark dashed lines in charts). The information for all charts is obtained from Netflix quaterly statements.

Netflix posted great earnings this quarter, but its revenue per subscriber is constantly declining, as it loses very profitable DVD customers and gains less profitable streaming customers.

While gross profits (Netflix calls these "contribution profit" and it is different from actual gross profits but good enough to draw some estimates from) in their US business per subscriber remained stable, Netflix has been posting significant reductions in losses for International streaming customers.

DVD contribution profits per subscriber are relatively stable around $15/subscriber. Domestic streaming shows a slight uptrend moving towards $5.50/subscriber by the end of the year. Currently it sits at $3.91/subscriber.

Overall, I expect the revenue decline per subscriber to start stabilizing as we approach the minimum possible that a subscriber can pay Netflix. In 2014, we will also start to see the effect of Netflix's new streaming plans. The effect of those plans is unknown and I will update this model later in the year if they have a significant effect on the revenues or profits per subscriber.

Predictions

I expect Netflix Domestic Streaming subscribers to rise to around 40 million at the end of the year. For International Streaming, I expect the number to rise to over 15 million at the end of the year. I expect DVD customers next quarter to be just under 6.9 million, dropping to 6.5 million at the end of the year.

Based on the chart above (numbers in thousands):

Q1 2014Q2 2014Q3 2014Q4 2014
Domestic Streaming Subscribers35,67036,42837,96439,499
International Streaming Subscribers12,53013,11414,30015,486
DVD Subscribers6895673665916459
Total55,09556,27858,85561,444

Here is an estimate of Netflix Share count (in thousands) based on past dilution:

Q1 2014Q2 2014Q3 2014Q4 2014
Netflix Share Count61,88162,36262,84363,324

Based on the above two tables and the "Revenues and Earnings per Subscriber" chart, I have estimates of:

Q1 2014Q2 2014Q3 2014Q4 2014FY 2014
Revenue1,271.8451,296,6451,353,6471,410,9315,333,068
Earnings53,80668,09186,376107,509315,782
EPS

0.87
(Netflix Guidance 0.78)

1.091.371.75.03

I expect this kind of growth to continue in the future as Netflix expands its International presence and moves towards profitability in International markets. Compared to Pandora (NYSE:P), which has a forward P/E of 109 according to Yahoo! Finance, Netflix seems reasonably valued even after the run up. This would imply my estimate of forward P/E for Netflix is about 75. That is higher than the average analyst forward P/E for Netflix of 55 (from Yahoo! finance). Netflix currently sports a TTM EPS of 1.85. So growth to $5.05 represents greater than 170% growth.

However, considering that analysts have a much higher opinion of Netflix earnings than my charts, they believe that Netflix will break above current growth trends. This is possible by either getting to international profitability faster than I predicted or growing subscriber numbers faster than I predicted. The other explanation is that they believe the new plans will have a significant effect going forward. However, the trends in Netflix's growth are clear and it is very possible we might have a disappointment or two going forward. If we do, I might get into Netflix. (All charts were created by me, based on Netflix quarterly statements.)

Source: How Promising Is The 2014 Outlook For Netflix? A Look In Numbers