NETFLIX VALUATION

Presented by: Group 4_ Section B

Anshul Singh (316)
Anupam Mazumdar (317)
Megha Bepari (330)
Riju Pathak (342)
Nipan Talukdar (335)
PROJECT APPROACH

Company
overview

Industry analysis

Estimation of
parameters

Valuation

Recommendations
 COMPANY BACKGROUND

Netflix is an American entertainment company founded by Reed Hastings and Marc

Randolph on August 29, 1997 and is headquartered in Los Gatos, California.
It specializes in and provides streaming media and video-on-demand online and DVD by
mail. In 2013, Netflix expanded into film and television production, as well as
online distribution.
Netflix's initial business model included DVD sales and rental, although subsequently
focus shifted towards DVD rental by mail business.
In 2007, Netflix expanded its business with the introduction of streaming media, while
retaining the DVD and Blu-ray rental service.
The company expanded internationally, with streaming made available to Canada in
2010 and continued growing its streaming service from there; by January 2016, Netflix
services operated in over 190 countries.
Netflix Inc. was a $300 million e-commerce startup when it became a public company in
2002 with a share price of $15.Its now a $68 billion streaming giant trading at about
$183.6 per share
 ESTIMATION OF PARAMETERS

HURDLE RATE

Beta cost of equity

Cost of debt weighted average of various interest rate of all debt from annual report
WACC cost of equity & cost of debt

SUSTAINABLE GROWTH RATE

g= b* ROE; Netflix doesnt payout dividend nor does it plan to do so in the future; b=1
g= ROE

PERPETUAL GROWTH RATE

The perpetual growth rate to be applied should be less than the economic growth of the country. Since Netflix is a
multinational company hence the growth rate in the global economy (or at least those parts of the globe that the firm
operates in) will be the limiting value.
 ESTIMATION OF PARAMETERS

BETA

Time period considered since inception

Market values for regression: S&P 500 index
VALUATION METHODOLOGY

Discounted Cash
Flow Valuation

APV

Comparable
(Multiples)
DISCOUNTED C ASH FLOW
ADJUSTED PRESENT VALUE
COMPARABLES
 REFERENCE

http://www.nasdaq.com/symbol/nflx/stock-comparison

http://people.stern.nyu.edu/adamodar/pdfiles/papers/valuesurvey.pdf

http://www.iese.edu/research/pdfs/di-0449-e.pdf

http://ceajournal.metro.inter.edu/fall06/torrezetal0202.pdf
THANK YOU