Through a series of missteps and miscommunications, shares of Netflix (NAS: NFLX) have fallen more than 70% from all-time highs set in July.

One school of thought would argue that the video guru clearly lost its way. In this view, shares are either fairly valued today or headed for even deeper pain.

I disagree. Netflix is a screaming buy today. And I'm putting my money where my mouth is: I expanded my own real-money holdings last week.

In my view, Netflix was a good buy at $200 per share. Since then, the company has put its back into digital video while seemingly giving up on DVD shipments. That's exactly the right strategy. Hence, Netflix is a great buy today.

Close that window, please!
CEO Reed Hastings opened a window of opportunity for rivals to pounce on the ill-conceived idea of forcibly splitting the company in half. Until streaming licenses cover a library as large and compelling as the DVD side, there's serious value in the integration. You get more information and quicker movie access in fewer clicks. Convenience is king.

But DISH Network (NAS: DISH) decided that streaming services under the Blockbuster brand should be used to market DISH subscriptions rather than standing on their own. Coinstar (NAS: CSTR) still doesn't have a download or streaming companion to go with its famed Redbox vending machines. Amazon.com (NAS: AMZN) is buying content licenses but has failed to market the service effectively. Liberty Starz (NAS: LSTZA) is trying to spread its relicensing strategy over a wider market with no direct portal plans of its own. And Time Warner (NYS: TWX) property HBO could easily create a serious Netflix rival if only it were willing to loosen ties to the cable industry. No dice.

They could try again, but Hastings closed that window quicker than you can say "28 Days Later." All of these potential threats turned out to shoot blanks.

Finally, some investors worry about the overhang of license payments that are rolling onto the balance sheet over the next five years. This would be a legitimate worry if Netflix was just paying money and getting nothing in return. That's not how it works.

Those costs are realized when licensed content actually becomes available for Netflix customers. The cost is balanced by new assets and are equivalent to the costs of buying new DVDs. If you build it, they will come, as Kevin Costner might say. A stronger content library means more customers, ergo more revenue, and that seemingly crushing cost should pay off nicely as the years roll by.

When all is said and done ...
The current price makes sense only if you assume several worst-case scenarios playing out. Chances are that Netflix will deliver on at least some of its promises, which should be enough to double the share price in 2012. If Hastings is on fire with a combination of fantastic international growth, all the right marketing moves, and a compelling haul of new streaming licenses, the stock could do even better than that.

I'm not catching a falling knife. Netflix is a screaming buy.

Digital video will help networking stocks, too. The Fool's top analysts sat down to compile a report on the best stock for 2011 and came up with an infrastructure play you've probably never heard of. Yet this company rides the rising video traffic just as directly as Netflix itself. The report is totally free and has been updated to keep up with the changing times. Get your copy right now -- it's free for Fools.

At the time this article was published Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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