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(NFLX) Netflix...the Misunderstood Movie Buff

|Includes: Netflix, Inc. (NFLX)

Netflix valuation is hard to justify at this point now that the P/E matches the earnings growth rate of 55%.  But when you take into account the fact that Netflix past earnings are based primarily on the DVD by mail business within the United States solely, it should be easy to see how their rapid growth can continue and possibly even accelerate.  

The business model has shifted from DVD by mail to Streaming, which was always the original intent of the Company from it's inception.  Spending more on streaming content (i.e. Epix, Relativity Media deals) is partially offset by savings on mail delivery costs.  Consumers will continue to recognize the value in $9 a month subscription service and would probably be willing to pay $10 now that there is much more online content available, leading to more subscribers and broader margins. 

The planned international expansion into the U.K. in 2004 was scrapped so that Netflix could secure U.S. market and focus on rollout of streaming.  Now the International expansion begins with Canada and is Streaming only (again, no mail delivery costs which will help margins).  And then there is the rest of the International Arena...American Cinema has always been revered all around the world.  The Netflix 'little red envelope' could very well be available for delivery via streaming in several different countries within the next few years with the U.K. being the most obvious first choice.


Disclosure: Long Netflix