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The Unintelligible Investor

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  • Pricing a Collapse That Isn't There [View article]
    you are correct that markets are "supposed" to be look ahead 6 months. but as you can see from the jobs chart, stock markets and payroll loses fell in lock-step, meaning the stock market wasn't particularly forward looking at all.

    the market is not a perfect prognosticator. if fact, MOST of the time the market is wrong on what its actual price should be.
    Aug 10 01:43 PM | 1 Like Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    you make a great point ... NFLX certainly could expand their product offering to all kinds of things ... I think that's actually somewhat baked in to my assumption that ARPU increases from $11 to $24 over that time. the thing with something as uncertain as what you suggest is that its impossible to know ... making NFLX very hard to value and much more of a gamble than an investment
    Jul 29 08:16 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    agreed ... competition is lining up to steal market share from NFLX
    Jul 29 02:38 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    actually ... i did not miss that crucial step. i included a terminal value portion that assumed 3% growth from 2026 to the everafter and discounted it at 12%.

    Note that future free cash flow is substantially lower than income becuz acquisition costs of future content will be much greater than amortization of prior content. Income should not be used in a DCF. Also, your ~13x P/E ratio assumes a much greater amount of growth than a 3% terminal rate would call for.

    Also, your assumption of a 5% discount rate is way too aggressive. given the high unlikelihood of this scenario occuring, a 12% discount rate is properly too aggressive.

    I agree with your statement that you are obviously not an accountant ;)
    Jul 29 02:37 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    and your assumption that NFLX can grow earnings 50% per year for the next 3 years is VERY aggressive. My model predicts ~25% growth in years 2 and 3. Even at that pace, NFLX must double their subscriber base in the US.

    To achieve 50% per year, the international base would have to grow to some 10 million subscribers. I'm all ears as to how this will be accomplished.
    Jul 28 06:09 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    Excellent point. i should have also mentioned that, in the model, the # of people per household declines over time as per very clear demographic trends. In the US, the number declines from 2.6 to 2.2 from 2011 to 2026.

    Internationally, the number declines from 4 to 3 ... hence why I used 3.

    12% discount rate. i can email you the spreadsheet if you'd like to poke around.
    Jul 28 06:03 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    Yes ... but as you say, the "PRICE WOULD REMAIN UNCHANGED". I prefer investments where the price increases. Obviously NFLX has had a spectacular, and mostly deserved run, but the good times are over.
    Jul 28 05:57 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    actually, that's exactly what I wrote
    Jul 28 03:21 AM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    excellent point. a single subscription can be used in more than 1 household ... even worse for NFLX.
    Jul 27 01:41 PM | Likes Like |Link to Comment
  • Overvalued Netflix: Too Many Great Expectations [View article]
    I agree completely about the ARPU estimates being too aggressive. Further reason to believe the current valuation can't be satisfied by future earnings.
    Jul 27 12:25 PM | Likes Like |Link to Comment
  • Rail Traffic Takes Expected Holiday Dip [View article]
    would definitely be a factor.
    Jul 15 02:25 PM | Likes Like |Link to Comment
  • Money Supply Growth Alert [View article]
    look, world oil consumption is growing 2% a year, set to hit 90M bpd in 2012 and ALL this growing demand is being met by higher cost forms of supply. So producers have to ask for a higher price or they can't operate. And oil demand is pretty sticky, so consumers pay up. It's pretty simple.

    FX and money supply issues don't seem to be impacting Natural Gas all that much do they?

    As for speculators, perhaps they are making these speculative investments because they see that fundamental market conditions create a long-term bias in toward higher oil prices!
    Jul 8 03:38 PM | Likes Like |Link to Comment
  • Money Supply Growth Alert [View article]
    gasoline prices have increased just as much in countries where the currency has remained strong. The increase in gasoline prices is due to tight supply.
    Jul 8 09:56 AM | 2 Likes Like |Link to Comment
  • Story Stocks, Part 2: Why I'm Bearish on Netflix and Research In Motion [View article]
    sorry ... i read this after i made my comment! you have done your homework.
    Jun 24 10:27 AM | Likes Like |Link to Comment
  • Story Stocks, Part 2: Why I'm Bearish on Netflix and Research In Motion [View article]
    yes ... but u obviously haven't considered just how much earnings growth is required over the next 15 years to justify NFLX's current valuation.
    Jun 24 10:26 AM | Likes Like |Link to Comment
COMMENTS STATS
173 Comments
177 Likes