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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (44724)	10/1/2011 7:40:19 AM
From: Difco	Read Replies (1) \| Respond to of 78666

How do you get to the $3 billion valuation? I think that when the stock was popular, people were mostly focused on how quickly it was adding subscribers, which probably was not the best metric. I used to own China Mobile and every month I would see millions of people being added, but then when it reached 400 million I realized it had already been factored in. Maybe sales per subscriber is good metric? Whether it's a good idea to split the business or not, nobody knows and once we do know it won't be a good buy anymore. I hope you are right that it goes even lower from here. I'd tell you, I think your household might be a good catalyst of what happens to NFLX. Similar to people asking you whether your wife is excited about stocks or not - honestly you might be having the best metrics at home. Keep us posted.

To: Jurgis Bekepuris who wrote (44724)	10/1/2011 9:11:10 PM
From: Mark Marcellus	Read Replies (1) \| Respond to of 78666

If you have to invent special metrics to value a company, then it's most likely you're just fooling yourself that it's cheap. Comparable takeover prices proposed by Mark Marcellus in his response is IMHO one of such metrics. Lots of people lost tons of money expecting comparable takeover pricing Well, since I'm not investing in NFLX, I guess we agree on that point. However, I'm not suggesting comparable takeover prices as the metric. I tossed the YouTube price out just to give some perspective. My point on valuing NFLX was: - You have the DVD business which is fairly easy to project and is perfectly suited to being valued with a terminal DCF analysis. - Once you've done that, you will know what an acquirer would be paying for the streaming business. Anyone with detailed knowledge of the industry should be able to do a reasonable estimation of the range of values that would make it a good acquisition for a GOOG or MSFT. (IMO, MSFT is the most likely acquirer in this hypothetical scenario, they need it more and it nicely complements what they currently have). I'm not equipped to do the analysis to determine what NFLX is worth to an acquirer - and as you said comparitive takeover prices aren't going to get you there. Anyone who isn't equipped to do that, and who is looking at this stock, should realize that they're the sucker at the poker table. Having said all that, my hunch is that your SWAG of 3B is way too low, but both of us will have to sit on the sidelines and wait to see. I also think the decision to split the business was right - creative destruction and all that. The split was inevitable in the long run and for that matter NFLX has clearly stated that this was their long term strategy. The business is consolidating rapidly, and I think Hastings was right to get out in front of this so he's in a position to strategically combine with partners or get taken over outright. The streaming business is a powerful franchise, but it is getting to the point where they won't be able to go it alone. They need strong partners.