Netflix (NFLX) is breaking out to an all-time high. Here’s a look at the stock as of today:
One-Year Chart
The bad thing is NFLX has a 58 P/E. That’s been the case against buying the stock for a while. Other than that this stock looks very good. NFLX has gone from $100 to $250 in the last year. Its been overvalued the entire time.
Here’s the catch with buying here: NFLX hasd next quarter’s earnings estimates lowered this month. Now 39% profit growth is expected. Last quarter profits were up 88% so we could se profit growth moderate. Maybe NFLX will beat the street, but three quarters ago it missed buy a penny, as the Earnings Table shows. With the company spending big-bucks on aquiring content, I don’t know what to expect.
One more thing: Current 2011 estimates are for $4.46, up from $4.39 last quarter and $3.87 the quarter before. So estimates only increased 7 cents after the company reported earnings, compared to 52 cents a few months ago. That’s slowing momentum.
Fair Value
I figure NFLX is worth 45 times earnings, that gives it a Fair Value of $201 right now. With the stock at $258, NFLX is a little high. A year from now the stock could be around $300, so people who buy the breakout might still make out good.
Expected profit growth for the next four quarters is 39%, 57%, 31% and 26%.
Bottom Line
I love NFLX stock. I’m just looking for a better place to get in. If the stock market would give this stock a fair P/E of 45 then we would be able to purchase at around $200.
