Shares of Netflix (Nasdaq: NFLX) hit yet another all-time high yesterday, after Caris & Co. analyst David Miller jacked up his price target on the flick flicker.

Miller is now holding out for a share price of $316, well above the now-obsolete target of $224 he had previous set for Netflix.

The more intriguing part of Miller's adjustment is that his thesis hinges on profit margins widening as the result of a significant drop in cost of goods sold. Miller sees the dot-com darling's cost of goods sold falling through 2012.

Miller's move may seem unusual given how every studio is adamant about milking more money out of Netflix on licensing content for its fast-growing streaming service. The days of cheap deals for compelling content like the one that Netflix originally inked with Liberty Starz (Nasdaq: LSTZA) are history.

However, the beauty of Netflix is that it can take the hit. It has the economies of scale to pay well for content that it can then serve up to its base of more than 20 million subscribers. In the end, it will be far cheaper than buying a ton of DVDs and pay roundtrip shipping for every request. If more streaming translates into fewer physical rentals, Netflix's margins can continue to improve as it writes bigger checks to studios in licensing deals instead of to the post office.

Streaming also finds Netflix hitting where the others can't. Let Coinstar's (Nasdaq: CSTR) Redbox be the one to capitalize on Blockbuster's bankruptcy. Let the cable companies duke it out with (Nasdaq: AMZN) and Wal-Mart (NYSE: WMT) for streaming piecemeal rentals of new releases on demand.

Netflix's streaming library is getting bigger, and the regional distribution centers will always be around for the newer titles from stubborn studios.

Miller's jacking his bottom-line estimates dramatically higher as a result of the attractive streaming model. He now sees Netflix earning $4.93 a share this year. His previous target calling for $6.18 a share next year is now $7.60 a share.

Few will call Netflix cheap trading at more than 30 times Miller's target for next year, but it's an easier multiple to stomach than Netflix's stiff trailing P/E. Then again, those who have judged Netflix by the past and not the future are also the same cynics that have been burned by its percolating share price.

What is fair value for shares of Netflix these days? Share your thoughts in the comment box below.

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Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.