Where Will Netflix Stock End 2010?

Can Netflix stock continue its run, or will shares fall back? Take out poll to see what 'TheStreet' predicts.
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(Netflix poll updated with new all-time high)

NEW YORK (

TheStreet

) --

Netflix

(NFLX) - Get Report

stock hit yet another all-time high on Tuesday after reports of a possible merger with

Apple

(NFLX) - Get Report

surfaced.

Glecher & Co. analyst Brian Marshall told

CNBC

that an Apple/Netflix deal makes sense. "You know, Apple wants to be the first company to seamlessly integrate the home office and the living room," Marshall said during the

Fast Money

segment. "What's limiting them now is basically content and better broadband into the home. In terms of content, they have over 10,000 titles on iTunes. Netflix has over 100,000 titles. That would be a pretty interesting marriage right there."

Shares hit a high of $179.56 in midday trading, before falling back slightly, to close up 6.5% to $177.62.

This is the second time over the past week Netflix reached a new high. Last week the company hit $174.94 after reporting

third-quarter earnings

. But can the Internet movie rental company continue on this run, or will shares fall back?

Netflix shares keep rallying even as third-quarter profit missed expectations. During the quarter, Netflix earned 70 cents a share, one cent shy of analysts' forecast.

Still, investors were wooed by the company's ability to grow its subscriber base by record numbers. Netflix gained 1.9 million new customers in the third quarter, a 90% surge from a little over 1 million new users in the second quarter. This marked the fourth consecutive quarter of more than 1 million new subscribers. The boost in users was driven by the launch of the Canadian streaming service in September, as well as new distribution platforms like

Apple's

(AAPL) - Get Report

iPad and TV, along with Internet-enabled televisions and Blu-ray players.

3 Stocks I Saw On TV

var config = new Array(); config<BRACKET>"videoId"</BRACKET> = 647621340001; config<BRACKET>"playerTag"</BRACKET> = "TSCM Embedded Video Player"; config<BRACKET>"autoStart"</BRACKET> = false; config<BRACKET>"preloadBackColor"</BRACKET> = "#FFFFFF"; config<BRACKET>"useOverlayMenu"</BRACKET> = "false"; config<BRACKET>"width"</BRACKET> = 265; config<BRACKET>"height"</BRACKET> = 255; config<BRACKET>"playerId"</BRACKET> = 1243645856; createExperience(config, 8);

The company also upped its forecast for subscriber growth, and is now expecting between 19 million and 19.7 million subscribers by the end of the year, compared with a prior guidance of 17.7 million to 18.5 million.

Netflix is attributing much of this growth to its push to move from a DVD-by-mail company to a streaming company. During the quarter, the number of users who streamed content for more than 15 minutes was 66%, up from 41% in the third quarter of 2009 and 61% in the second quarter of this year.

Analysts, though, are questioning how much longer Netflix can continue to grow at its current pace, predicting expansion could slow as earlier as next year. Once this growth plateaus, Netflix's stock price will likely hit the brakes as well.

"In our view, the current valuation does not reflect the ongoing challenges in acquiring additional streaming content, nor the increasingly competitive landscape, as well-funded competitors (Google, Hulu, Apple) ramp up offerings," Susquehanna Financial analyst Marianne Wolk, wrote in a note.

Concerns also loom over the uptick in content costs. In the third-quarter content costs were higher due to an up-front payment to EPIX, which drove gross margins down to 37.8% from 39.4% in the second quarter.

But Janney Capital Markets analyst Tony Wible upgraded Netflix to neutral from sell, citing more revenue opportunities tied to cord cutting (when people stop paying for TV and turn to Internet TV services), new pricing models (both subscription and a la carte), and international expansion.

Netflix closed on Friday at $168.10, up 8% from the beginning of the week. And so we ask the question:

Will Netflix stock continue to move higher, or will shares digress by the end of 2010?

Take our poll below to see what the investors of

TheStreet

predict.

--Written by Jeanine Poggi in New York.

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Jeanine Poggi

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