Intended for MBAs, this case concerns the valuation of Netflix, Inc., which was the largest U.S. online movie rental subscription service in early 2009. After reviewing Netflix's historical financial and customer relationship performance, this case presents three approaches for valuing the firm in early 2009. The first is a company-level discounted cash flow analysis based on pro forma projections of revenues, earnings, and cash flow. The second approach attempts to judge whether Netflix's prevailing market value was reasonable by comparing selected company ratios with those of comparable companies. The final approach is based on the assumption that Netflix's enterprise value (EV) was the sum of its current and future subscribers' values (discounted present values, to be exact). There is also a spreadsheet available for students (UVA-F-1610X).
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Case Study|
January 20 2017
Valuation of Netflix, Inc.1
This case was prepared by Phillip E. Pfeifer, Richard S. Reynolds Professor of Business Administration, and Robert Conroy, J. Harvie Wilkinson Jr. Professor of Business Administration. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation.
Publisher: Emerald Publishing
Online ISSN: 2474-7890
Copyright © 2009 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.
2009
University of Virginia Darden School Foundation
Licensed re-use rights only. To order copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.
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Pfeifer PE, Conroy RM (2017;), "Valuation of Netflix, Inc.1". Darden Business Publishing Cases, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/case.darden.2016.000339
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