On Monday, Hedge Fund manager and CNBC contributer Whitney Tilson set out a prediction that Netflix (NASDAQ:NFLX) gains are just beginning, saying, "it's a long way from the point at which I'd sell it."
He predicted NFLX could grow 30%-40% along with the rest of the industry - saying, "As long as Netflix has dominant market share and no new competitors to erode its competitive position - we see no reason why Netflix's business won't grow at 30-40% - the same rate as the industry."
So, if Netflix did grow 30-40% With Tweaker, our stock valuation tool, its easy reflect your own opinion of a stocks valuation by plugging in your own percentage ranges. Plugging the percentage ranges into Tweaker, our mobile stock valuation tool - it will make a chart for you with a clear range of where the stock gets overvalued and undervalued based on your entered percentages.
Currently, Wall Street consensus has Netflix growing at 21.3-28.8% with a profit margin of 4.1-5%. Following Tilson's recommendation, let's Tweak growth to 30-40% and profit margin to 8%. Streaming margins are in the 8+% range and because Netflix is facing higher content charges profit margin is likely to stay in the lower percentages even though growth is potentially quite high.
Profitable range goes from $100-$180 to $125-$260, becoming overvalued near its previous peak.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.