In past couple of weeks, Netflix (NFLX) has made some advancements in terms of signing content deals and expanding its reach on mobile devices. Netflix is going through a tough time and taking it one step at a time despite having a foot with a hole in it, as Reed Hastings recently quipped. Even hedge fund manager Whitney Tilson who famously published his short thesis, is now long the stock. The focus for next few months will be on expansion in the U.K. and Ireland that will help hedge the company from increasing competition from Amazon (NFLX) and Dish Network’s (DISH) Blockbuster in the future.
Our price estimate of $142, implying a premium of more than 60% to the market price, reflects our optimism for the company in long term. Netflix has recently signed a multi-year deal with MGM studios to exclusively stream its first run movies in U.K. and Ireland.  Additionally it inked another deal with Lionsgate U.K. as it prepares for its foray in this market. Furthermore, Netflix is in talks with ITV to acquire some of its content for streaming in this new territory.  Netflix plans to expand in U.K. and Ireland in 2012, and is likely to run at a loss, at least in the first half of the year, due to several content deals that it needs to strike in order to stream in this region.
(Chart created by using Trefis' app)
On the domestic front, Netflix and Disney’s (DIS) ABC Television Group have reached a new agreement to provide seasons from ABC’s TV shows to its subscribers. Additionally, the company also announced that its streaming service will also be available on Barnes & Noble’s NOOK tablet. In a recent move, the company made its app available on Amazon’s Kindle fire and re-invented its user interface for android app to give it a more user friendly and modern look.
There is no single way to repair the damage that the company has done to itself. It is going to take a good deal of time and focused efforts to regain customer confidence. We’re optimistic that Netflix will get there, and that the current valuation does not justify the potential of the company. Overall, analysts seem to be positive on Netflix with their price targets, and seems like the worst is over for the company.
- Netflix and MGM Announce Multi-Year Premium Pay TV Window Agreement in the United Kingdom and Ireland, Netflix Press Release, Nov 7 2011
- ITV ‘in advanced talks’ with Netflix over video streaming, guardian.co.uk, Nov 8 2011
Disclosure: No position