Netflix strikes out in its search for pay TV partners
What about Time Warner? A partnership with the cable company would be a good idea.
Time Warner Cable has close to 12 million subscribers. It is not known how many of these already have Netflix subscription. However, if the two companies partner and Netflix gains close to half of these subscribers in next three years or so, this will imply a net addition of 6 million subscribers.
Let's assume that close to 40% of these are already reflected in our forecasts. This means that a gain of close to 3.6 million subscribers could be incremental to our forecasts in the span of next 3 years. This could lead to an upside of close 8% to our price estimate for Netflix.
Although there are certain assumptions involved in the above calculation, one can be certain that there is definitely some meaningful gain that would come out of this partnership. Even if it is not an incremental gain, it could definitely prove to be a hedge against increasing competition.
Our price estimate for Netflix stands at $133, and implies a premium of about 20% to the market price.
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