I have written before about Netflix, thinking the stock was way overvalued at $132 a share. Of course, whoever reads the article now will laugh, since the stock is now trading at $210!

Do I still stick to what I’ve said before? Absolutely, I think now that NFLX is a dangerous stock, that may pop any day now, regardless what all the analysts are saying. Why do I still think this way? Well, Netflix is very close to market saturation, and its P/E is as high as 53. Not to mention, of course, that competition will soon (maybe very soon) creep in.

Let us examine some numbers: Just over a year ago, when I’ve written the first article about Netlfix, the stock was trading at $132 and its customer base was 15 million subscribers. Today’s customer base is up 10 millions subscribers, to as high as 25 millions subscribers, in the United States, Canada, and Latin America (according to Netflix). This means that there was a 67% increase in the customer base. How does that reflect in the stock? Well, let’s see, 132 x 1.67 = $220, which means that investors, at this current moment, value Netflix less than what they used to value it a year ago, not by much, but enough to say that investors no longer anticipate huge growth potential in Netflix

Imagine if Netflix cannot add as many customers next year as it did this year, what will happen? Investors will definitely believe that Netflix has reached a point where it can no longer maintain the growth, and a point where its only aim is to maintain its current customers, maybe through better deals and reduced pricing, which, in its turn will reduce the profitability of the company, which in its turn reduce the price of the stock.

Now let’s think about Netlflix as a business model, will their business model survive in 10 years, 20 years, 53 years? I doubt it that the business model will survive in 10 years, with all the breakthroughs especially in the entertainment industry, and I’m confident that Netflix will cease to exist (at least in its current form) 20 years from now. So why is the market valuing it at a P/E ration of 53? No idea. Regardless of how many subscribers Netflix can add next year (or quarter), the company will not impress investors. Competition will be very fierce in that area, especially from Google (a company that wants to diversify its products) and Apple.

But how much is Netflix really worth as a company?

I don’t know for sure, but I would trade such a stock at a P/E of only 10 (the future is not as bright as the present for Netflix), which means that each stock should trade, in my opinion, at around $40. And since Netlfix has 52.54 million shares, this means that Netflix, as a company, is worth $2.10 billion, and nothing more. The $9 billion extra on its market cap are just pure hype, and you will see them quickly vanish the moment Netflix misses an estimate.

Will I short Netflix? Never, but I will never trade it either.