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How Netflix Has Almost 30% Upside

"Q3 has begun strongly for us, and we expect to be profitable again in Q3. In Q4, we will launch our next international market, which will drive us temporarily back into the red," wrote CEO Reed Hastings and CFO David Wells.

If Netflix is able to negotiate global content deals instead of localized ones, and the company's original programming causes lower churn, these are incremental positives for Netflix. Netflix's first major original programming, House of Cards, will premiere on February 1, 2013.

While DVD disc sales are declining, Devitt noted that disc rentals have shown to be more resilient, which should help Netflix going forward. Even though disc rentals offer higher margins for Netflix as opposed to streaming, customers with multi-disc rental subscriptions will stay with Netflix, as "...they cannot get their fix from Redbox." Redbox is owned by Coinstar (CSTR).

That's not to say there isn't an abundance of questions for shareholders, namely profitability in a maturing domestic market, and a global market which should see a prolonged investment cycle. There's also the risk that Amazon's LOVEFiLM will continue to grow at the same rate as Netflix's international business.

Shares of Netflix have had a very bumpy ride in 2012, although they are only down 3.89% year-to-date. Shares reached nearly $130 in early February, when it looked like fears were overblown. Since then, the company has lowered guidance, and concerns over profitability have continued to hit the stock.

It may be that Netflix is not going to be a major cash cow for investors, but Devitt believes the US business alone is enough to "queue up" support for the stock. We'll see if he's right.

Interested in more on Netflix? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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