Netflix, Inc. (NASDAQ:NFLX) reported its September quarterly results yesterday. Expectations were already sky high, but the online video company still managed to beat the consensus. Netflix reported Q3 earnings of 52 cents, while analysts polled by Thomson Reuters were expecting 49 cents. Revenue of $1.1 billion was in line with estimates. The company also raised guidance for the current quarter that prompted a 9% rally in the stock. Netflix, Inc. (NASDAQ:NFLX) shares have risen more than 280% this year so far.

netflix

After solid earnings, many analysts raised their price targets on the stock by as much as $200. But Bank of America analysts Nat Schindler, Justin Post, and Jason Mitchell remain extremely bearish on the stock. While Netflix, Inc. (NASDAQ:NFLX) shares are trading well above $335 today, these bears have a price target of $158. In a research note, as reviewed by Matthew Boesler of Business Insider, the analysts said that it’s hard to find faults in the online video company. But it’s even harder to justify the price.

What does Netflix have to do?

According to the Bank of America Merrill Lynch analysts, here are the three things Netflix, Inc. (NASDAQ:NFLX) should do to justify its sky-high valuations:

To reach its current price level, Netflix Inc. (NASDAQ:NFLX)’s total number of subscribers should peak at 140 million. Of that, 70 million should be in the international market, and at least 70 million in the domestic market. Next, the online video company has to increase its prices by $3/month per user. Last, the company must increase its margins from current 24% to 47%.

Such a bullish view is not impossible. Netflix, Inc. (NASDAQ:NFLX) can do it by maintaining its growth rate. But that seems unlikely because the company has already reached 31 million of about 100 million U.S. households. To reach 140 million subscribers, Netflix, Inc. (NASDAQ:NFLX) will have to add 5 million new subscribers every year for the next 8 years in the domestic market, and 4.8 million new subscribers for the next 13 years in international markets.

BAML’s actual outlook of Netflix

BAML has a $158 price target with Underperform rating on the stock based on its sum-of-parts analysis. BAML analysts estimate the online video company’s peak penetration rate at 50 million in the domestic market and another 50 million in international markets. The company can reach that figure within six years. However, according to analysts, it will take Netflix, Inc. (NASDAQ:NFLX) 11 years to hit the same level in international markets.

The analysts believe that prices will remain almost similar for subscribers, and effective margins will rise to 35%. The Bank of America Merrill Lynch analyst’s view indicates that the Netflix, Inc. (NASDAQ:NFLX) bubble will burst. It’s only a matter of when.

Netflix, Inc. (NASDAQ:NFLX) shares were down 4.62% to $338.80 at 11:49 AM EDT.