Valuation of Netflix, Inc.1

Darden Business Publishing Cases

ISSN: 2474-7890

Publication date: 20 January 2017

Abstract

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).

Keywords

Citation

Pfeifer, P. and Conroy, R. (2017), "Valuation of Netflix, Inc.1", Darden Business Publishing Cases. https://doi.org/10.1108/case.darden.2016.000339

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Publisher

:

University of Virginia Darden School Foundation

Copyright © 2009 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved.

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