Netflix Inc (NFLX) Earnings Preview: Why so Expensive?

Even with a terrible year earnings-wise in 2012 and all of the competition, Netflix still trades at an extremely high valuation, even when compared to projected future earnings.  Consensus estimates call for earnings of just 4 cents per share this year, so a P/E ratio isn’t very meaningful.  In 2013 and 2014, analysts are calling for earnings of $0.40 and $1.40 respectively, and even if Netflix achieves this, that means it is trading at 73 times 2014’s earnings.

I’m not particularly concerned with the earnings numbers themselves at this point in the game.  I want to know how, despite all of the factors working against them, Netflix is planning to grow its profitability to a point that justifies the astronomic valuation of the stock.

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