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Case
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Reference no. UVA-F-1610
Published by: Darden Business Publishing
Originally published in: 2009
Version: 4 October 2013
Revision date: 4-Dec-2013
Length: 13 pages
Data source: Published sources

Abstract

Intended for MBAs, this case concerns the valuation of Netflix, Inc, which was the largest US 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.

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Abstract

Intended for MBAs, this case concerns the valuation of Netflix, Inc, which was the largest US 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.

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