Every quarter, Netflix, Inc. NFLX 0.5% investors wait on the edge of their seats for the company to update its subscriber count number. In fact, Netflix stock tends to trade more in reaction to subscriber countthan earnings or revenue.
However, at some point, every investor must focus on the top and bottom lines. On Thursday, Bernstein analyst Todd Juenger attempted to bridge the gap between subscriber count and earnings for Netflix investors. According to Juenger, conservative estimates of the net present value of each subscriber that Netflix adds is roughly $105 in profit.
This estimate coupled with Bernstein’s subscriber projections allows the firm to make some impressive long-term valuation projections. Taking into account churn, average revenue per user and content costs, Bernstein estimates that Netflix will reach 300 million subscribers and $25 billion in recurring EBITDA by 2030 (see Juenger’s track record here).
Assigning a conservative 12x multiple on those earnings yields a $300 billion valuation for the company within the next 13 years. Today, Netflix’s market cap stands at just $78.2 billion. In order to reach that conservative $300 billion valuation by 2030, the stock would need to deliver roughly 11-percent compound annual growth over the next 13 years.
Juenger repeatedly emphasized that these projections are on the conservative side.
“Our conviction stems from our belief that our 300mm sub forecast is more likely to be too low than too high,” he wrote.
Netflix has been…
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