Online streaming is the way to go these days and many sites are competing to come first. The top contender is NetflixInc. (NASDAQ:NFLX), facing off against the king of online streaming, Home Box Office Inc.

CEO Hastings stated Home Box Office Inc. was their biggest rival; many found this amusing. But this statement was proved true when Netflix Inc. (NASDAQ:NFLX) targeted original productions, which have been Home Box Office Inc.’s forte. Famous and well-known series like Game of Thrones, Boardwalk Empire, True Blood, Entourage and many more play a part in Home Box Office Inc.’s success. Netflix Inc. (NASDAQ:NFLX) started airing original productions which include House of Cards, Orange is the New Black, Hemlock Grove and others which brought NetflixInc. (NASDAQ:NFLX)  to the front and directly up against Home Box Office Inc.

Home Box Office Inc. retaliated by offering over-the-top streaming, a service which Netflix Inc. (NASDAQ:NFLX) is famous for. Over-the-top streaming enables users to watch the episode soon as it is aired. Netflix Inc.(NASDAQ:NFLX) has surpassed Home Box Office Inc. on more than one occasion. In the first quarter of 2013, Netflix Inc. (NASDAQ:NFLX) had more domestic viewers than Home Box Office Inc. and in the second quarter of same year, Netflix Inc. (NASDAQ:NFLX) also surpassed Home Box Office Inc. in revenue.

But here’s the thing,Home Box Office Inc. has been around for forty three years and is ahead of NetflixInc. (NASDAQ:NFLX) in profits and subscribers. Home Box Office Inc. has more subscribers (including both domestic and international) and if we include Cinemax, a movie-based channel which broadcasts movies only, then the number of subscribers equals to 138 million whereas Netflix Inc. (NASDAQ:NFLX) reported 57 million subscribers in its last report.

If we look at Home Box Office Inc. closely, then we notice that a major amount of Home Box Office Inc.’s profits is generated from international subscriptions. Around 70% of Home Box Office Inc.’s subscribers are from out of the US. HBOis available in over 60 countries and their content is permitted to run in 150 countries while NetflixInc. (NASDAQ:NFLX) is available in 50 countries and is aiming to authorize their content to be broadcast in 200 countries.

Using Home Box Office Inc. as a reference, Netflix Inc. (NASDAQ:NFLX) should concentrate its efforts on the global market. Netflix Inc.’s (NASDAQ:NFLX) subscriber growth increased by 67% but they faced a loss of $160 million in the international segment due to minor subscriber base and expansion costs. This loss will persist for a little while, but the majority of it will be covered up, since a third of Netflix Inc.’s (NASDAQ:NFLX) subscribers are from out of the U.S.

Also, Netflix Inc. (NASDAQ:NFLX) should consult the number of Home Box Office Inc.’s subscribers as a benchmark and the number of international users should be two times more than the domestic ones which would mean that if the number of domestic users was 70 million, then international users would be 140 million, a total of 210 million subscribers for Netflix Inc. (NASDAQ:NFLX). CEO Hastings has set a contribution margin of 40% for Netflix Inc. (NASDAQ:NFLX) until 2020, which would mean that the company hopes to generate a total of $10.8 billion.

Spending is 13.4% of the total revenue, which leaves operating profits of $8.7 billion. If we subtract interest expenses and taxes from the operating profits as well, this would leave Netflix Inc. (NASDAQ:NFLX) with a net income of $5.8 million. Keep in mind, all calculations have been made keeping in mind the Home Box Office Inc.model.

All of this won’t happen in one night, of course. Demand for home entertainment is always out there and if Netflix Inc. (NASDAQ:NFLX) applies the same strategy as Home Box Office Inc., it will succeed overseas like HBO did.

In this context, Squali made a statement in which he expressed his opinion regarding Netflix Inc.(NASDAQ:NFLX). Squali asserted that the analyst firm was going to reinforce the company’s BUY rating along with boosting its price target from $450 to $500. The reason for this is the recent trend which favors Internet TV and will advertently prove to be profitable for Netflix Inc.(NASDAQ:NFLX).

This is because, Netflix Inc. (NASDAQ:NFLX) is basically a television network which operates through Internet. This network is spread over more than 40 countries and incorporates almost 44 million members. The only thing that the members require is an Internet-connected screen and via this connection any video, at any time and in any place in the world is brought at their disposal.The estimated price target suggested by Cantor Fitzgerald delineates a potential upside amounting to almost 17.65% in comparison to the company’s present price.

Netflix Inc. (NASDAQ:NFLX) serves as the largest and most affordable online platform which merely charges $8.99/month. At this reasonable rate, Netflix Inc. (NASDAQ:NFLX) provides access to a myriad of online videos. Therefore, Netflix Inc. (NASDAQ:NFLX) attracts a hoard of subscribers. The investment made by the company on content is much more than that of its competitors and thus can claim a better content assortment to its name.

In contrast to these highly optimistic opinions, Paul Vogel states that he merely elevated the company’s price target because presently shares are being traded at a rate of $425, whilst previously he had estimated a trading price of $400 per share. Analysts at Barclay have given an ‘Equal Weight’ rating to Netflix Inc.(NASDAQ:NFLX).

Vogel gave a statement in this regard with delineated the analysts’ ambivalent feeling about Netflix Inc.’s(NASDAQ:NFLX) stock. He asserted that although the company has shown a progressive growth, yet analysts are unsure about the stock value. There are several reasons which are responsible for this confusion. First is the fact that profit yielded from every customer is minimal. Secondly, the expenditure on content is large and last but not the least is the increasing competition worldwide.

Vogel further stated that increased content expenses would decrease the margins. Moreover, the number of US subscribers is likely to decrease and owing to these two factors, growth of stock doesn’t seem very likely in future.

The statistics collected from Bloomberg suggest that 45.8 percent analysts are rewarding Netflix Inc.(NASDAQ:NFLX) with a buy rating. On the other hand, 41.7 analysts have given it a Hold rating, while a small percentage of 12.5 has given it a call to sell. Furthermore, the past year has shown an increase of 12.1 percent in the company’s shares.

The financial results of the past few months have witnessed volatility inNetflix Inc. (NASDAQ:NFLX)stocks. For some investors Netflix Inc.(NASDAQ:NFLX)isn’t the ideal choice for long-term investment. Yet, still there are others out there who pay heed to the company’s global expansion possibilities and its likely growth in future.

The opposing stances of EvercorePartners Inc. (NYSE:EVR) and StifelFinancial Corp (NYSE:SF) are a potent example of this very diversity in opinion.

A report was launched by EvercorePartners Inc. (NYSE:EVR) in this week, in which the sell-side analyst firm brought Netflix Inc.’s (NASDAQ:NFLX)stock from a rating of Hold to Sell. In support of this opinion, the firm stated that pressures on the subscription video on demand (SVOD) market are building up. To cope up with these pressures, higher investments are required. Furthermore, the returns from these investments cannot be guaranteed and remain uncertain. The previous target price on the stock was $380 per share and the firm brought it down to $70.

After the launch of this report, another report concerning the stocks of Netflix Inc.(NASDAQ:NFLX) came forward by StifelFinancial Corp (NYSE:SF). This report suggested that redundant concerns highlighting competitive pressures are rather exaggerated. David Scott, an analyst at StifelFinancial Corp (NYSE:SF), claims that these fears of intensification of competitive pressures have acted as the pivotal reason in action behind the decline, amounting to approximately 10%, in Netflix Inc.’s (NASDAQ:NFLX) shares. He further added that these fears are overdone since Netflix Inc.(NASDAQ:NFLX) continues to stand in the same position and with the same strength; rather it is becoming stronger owing to the incorporation of more content.

A recent trend of media and technology companies coming forward with their own SVOD services has placed a question mark on Netflix Inc.’s (NASDAQ:NFLX)position is market. HBO has also come up with its very own video on demand service which will probably be launched in April. HBO’s SVOD service has had a lot to do with the going down of Netflix Inc.’s (NASDAQ:NFLX)stock over the weeks.

Yet, Mr. Devitt is of the opinion that HBO’s launch of SVOD provider wouldn’t be affecting the position of NetflixInc. (NASDAQ:NFLX). He further stated that most of the customers, who will go for HBO now, will already be having Netflix, and the most likely possibility is that they would be keeping both, instead of discarding the latter.

He also stated that market has not yet realized the huge potential of expansion and consequent progress which Netflix Inc. (NASDAQ:NFLX)has in its global strategies. In light of this potential StifelFinancial Corp (NYSE:SF)has given NetflixInc. (NASDAQ:NFLX) a Buy rating and has placed a very high target price on the company’s stock amounting to almost $535.

On the other hand, EvercorePartners Inc. (NYSE:EVR) continues insisting that rising competition in market would propel Netflix Inc.(NASDAQ:NFLX)to increase its investments and the outcome of these investments is going to be ambiguous.

Process of Valuation of stock

If one is to classify Netflix (NASDAQ:NFLX), then advertently the company would be placed in its growth stages since it is continually growing and improving. Although, the company has a short history, but investors tend to ignore this fact and instead place their faith in the company’s commendable success rate. This statement can be reinforced by the fact that when the company failed to achieve its expected subscription growth target, there was a decrease of almost 20% in the third quarter of fiscal year 2014. In contrast, there has been a surprising elevation in the stock prices after the results of the recent quarter, where the earnings surpassed their expected target.

This situation might tend to pose a problem for Netflix (NASDAQ:NFLX), since in the coming years maintenance of growth might get complex as well as expensive. To counter such competition, Netflix (NASDAQ:NFLX) will definitely have to make a noteworthy investment. It is also very probable that growth might be on the slower side, since many other streaming platforms would be made available and people might prefer those.

The Present Multiples of Valuation

The current statistics suggest that Netflix’s (NASDAQ:NFLX)  stock is carrying out its trade at a multiple of 99.57. This multiple of 99.57 is for P/E of one year. These statistics serve as a premium valuation of approximately 110%, impacting the S&P 500 Index of Internet retail. In the past also, this pattern can be traced that Netflix (NASDAQ:NFLX) had made a point of going after the very trend of valuation of multiples for the index. However, this time an anomaly has been observed in the sense that Netflix (NASDAQ:NFLX) has outstepped the index. This outpacing has been made possible owing to the improvement speed of the company. This statement can be reiterated by the official figures which delineate that the stocks’ present premium regarding multiples based on earnings has exceeded the previous year’s average i.e. the premium of 74.4%.

Thus, if a comparison is made within the company’s own statistics (i.e. the present valuation multiple of the company with its past evaluation multiple); the results will make it evident that the company has outpaced the average of its last year with the present multiples.

But the reason for Netflix Inc. (NASDAQ:NFLX)’s interest in such shows is obvious. These series are not intended for today’s children, these are intended for tomorrow’s adults. Netflix Inc. (NASDAQ:NFLX)’s latest business decisions focus more on the future than on the present. Even though the adults will be interested in the release of these shows, still, the company is not targeting the nostalgic adults. The company is actually targeting the children. Netflix Inc. (NASDAQ:NFLX) wants to develop a loyal customer base of children so that when these children start earning tomorrow, they can pay to subscribe to Netflix Inc. (NASDAQ:NFLX)’s services themselves. So, Netflix Inc. (NASDAQ:NFLX) is looking for brand loyalty in the children of tomorrow. This ensures that the company’s profitability grows in the future as well.

With new media, the biggest issue is to achieve continuity, not to be just a temporary fad. For the time being, some item could be a hot one among consumers. But soon, competition and rivals begin making similar products and offering similar services and the item soon loses its integrity and uniqueness as the consumers move on.

So in order to remain competitive, Netflix Inc. (NASDAQ:NFLX) must add new content and attract new customers. These customers, the children, will remain loyal to Netflix Inc. (NASDAQ:NFLX) even after they have grown up.

A more interesting matter is that how would this impact the brand loyalty on TV. For the younger generation, TV channel loyalty is a mystery. They watch everything that they want to on laptops, tablets and smart phone. So the channels of entertainment that these kids know about are Hulu, Amazon and Netflix. The kids don’t watch their favorite shows on TV anymore, even though the TV channels are the original sources of all of these shows. It cannot be determined that how the thoughts of the viewers would change in future about TV. However, it is certain that ownership state would be changing soon in future.

It may be possible that soon the TV industry would change such that we no longer know about broadcasts and TV channels, we would only know about the services through which we view these shows. The idea of such a world is not new as many TV doomsdayers have posed the question before too. This is why both Amazon.com (NASDAQ:AMZN) and Netflix Inc. (NASDAQ:NFLX) are trying to adopt more family shows so as to attract the younger generation and keep them hooked. These strategies are important for the companies as well as the rivals.

The news brought so much joy to the investors that they were happy to ignore the reducing rate of member growth in U.S. Last year, the company shares had gone so low as to arrive at $325, and that too twice! But this year, the share price hiked to $478, which was a new 52-week high.

Netflix Inc. (NASDAQ:NFLX)’s share prices wiggle a lot, but the business is not volatile itself. Still, it will be beneficial for the long-term investors to pay attention to a few important things. Three important dates for the investors in the next month are 6 March, 20 March and 31 March.

This year Netflix Inc. (NASDAQ:NFLX) will bring forward original content. The executive team of Netflix Inc. (NASDAQ:NFLX) is planning to launch 320 hours’ worth of original series. This is thrice the amount of original content that was released in the previous year. The investors should look out for the release of Unbreakable Kimmy Schmidt on March 6 and Bloodline on March 20.

Unbreakable Kimmy Schmidt was going to be aired on NBC originally. However, the company executives were afraid that they are unable to support the show enough to build a strong, loyal base of viewers; so they sold it to Netflix Inc. (NASDAQ:NFLX). The latter isn’t worried about this though and is happy with the purchase.

Netflix Inc. (NASDAQ:NFLX)’s first deal with Sony studios resulted in the show Bloodline. This is a thriller show that can potentially attract many followers and viewers. The company, Netflix Inc. (NASDAQ:NFLX), would launch a major marketing plan for the launch of Bloodline. This will not only tempt viewers and customers but also increase the number of subscribers.

The downside for acquiring more original content is the cost of course. Just recently, the cash flows became negative. It looks like that the company would remain on this track for at least a year before they can assume positive cash flows again. The company had to take loans worth $1.5 billion in the current month.

March 31, the third most important date in the next month, is the closing date for yet another quarter. This quarter is expected to report an addition of 4 million new subscribers from all over the world. This would mean that the company is growing faster than it was in the same quarter last year. The revenue for the quarter should increase by 31% and reach $1.4 billion. The profitability of the company will also increase. But in terms of cash flow and profit, Netflix Inc. (NASDAQ:NFLX) may have a weaker year relatively.