The Right Way to Look at Netflix Earnings

If you are bold enough to look beyond the sell side analysis, today might be the day to start looking at NFLX. Now usual spreadsheet churning sell side might be focused on whether company:

• "Beat and raised" the quarter or was "in-line with consensus"
• Is spending money on new digitalization of the industry
• or valuation is at higher end of "our estimates"

But I would look on the sunnier side:

• Subscriber acquisition cost now below $30 and Average revenue per user per month of $13.

ANALYSIS: Company makes back the money it spends on acquiring the new customer in less than 3 months. Which other businesses are capable of doing that?

• Customer Churn is less than 3%

ANALYSIS: Only 3% of customer left the service or 97% of customer stayed or average customer stayed with company for longer than 2 years. Or Company makes more than $250 from that customer (More than 10x it spends)

• Enterprise value of business is less than $2Billion and Customer count is 8.5-9m (by end of year) so average value of customer we are paying is $225 or so

ANALYSIS: we get $130 per year (ARPU $13 X 12) for every $225 (avg value per customer)

But ABOVE ALL:

• Customer is growing at 20%+ per year
• Limited to no competition
• Strongest Brand in the industry
• Less than 10% of potential market penetrated.