How Much Netflix Stands to Gain From Higher Prices and Increased Subscriber Counts

Quote: Hundreds of Trefis members have created forecasts for two key driversof Netflix’s(NFLX) stock over the last week: (1) Monthly Netflix Subscription Fee, (2) Netflix Subscribers.Their forecasts suggest that Monthly Netflix Subscription Fee and Netflix Subscribers will trend higher than the Trefis forecast.These projections may not bode well for companies like Comcast (CMCSA) and Time Warner Cable (TWC) that compete with Netflix to deliver the latest film rentals to consumers. We currently have a Trefis price estimate of $82 for Neftlix’s stock, about 32% below the current market price of $121 based on concerns that Netflix’s average subscription fee will trend downward based on a rising mix of low-end plan subscribers and Netflix’s subscriber base will not grow as fast as the market expects.In comparison, Trefis members expect a slight rebound in average Netflix plan pricing and higher subscriber growth, leading to an estimate of around $120 for Netflix’s stock, in line with current market prices and more than 45% higher than our estimate for Netflix’s stock. Netflix’s stock is quite sensitive to both 1) MonthlyNetflix Subscription Fee and 2) NetflixSubscribers.Below are the charts showing recent estimatescreated by Trefis members for the two drivers in detail. 1. MonthlyNetflix Subscription Fee The average of forecasts for Monthly Netflix Subscription Fee created by Trefis members indicated a small projected increase from $13 in 2010 to $14 by the end of the Trefis forecast period, compared to the baseline Trefis estimate of a decrease from $12 in 2010 to $11 by the end of the Trefis forecast period. The member estimates imply an upside of 33% to the Trefis price estimate for Netflix’s stock. In the past, Monthly Netflix Subscription Fee has decreased from $17 in 2005 to $13 in 2009. You can drag the Monthly Netflix Subscription Fee foreca...
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