Valuation of Netflix, Inc.

Abstract

Rapid technological developments are occurring quicker than ever before in the twenty-first century. COVID-19 further exacerbated this issue by emphasizing the continuous changing of schemes in our society and economy. Enterprises, being one of the primary engines of the economy, must constantly change by efficiently adjusting to the new realities enabled by technological advancement. On the other hand, markets are the most accessible they have ever been in human history. Nowadays, anybody may access the markets using a smartphone app. Despite this, the sheer quantity of analysts and specialists throughout the world has made it exceedingly difficult for any individual investor to identify and pick firms that may provide considerable potential. This incident highlights the significance of recognizing a company's true value and the correct procedure for estimating it. Each company's value reflects its ability to generate profits for its owners. The evaluation of an entity's worth is a complex process that is governed by each individual's requirements. Its usefulness becomes important during the investment decision-making process. The purpose of this master's thesis is to calculate a theoretical equity value for Netflix, Inc and, as a result, its value per share. By discounting projected future cash flows to present value, the enterprise value was calculated. The dissertation presents and analyzes Netflix and the entertainment business from a strategic standpoint. The strategic analytical insight enabled a financial statement study of Netflix and the sector, followed by a forecast of future performance. The approach utilized was the Discounted Cash Flow model. Finally, the ‘fair' share value was compared to the actual stock market price to determine if its value is underpriced or overvalued and to effectively estimate its potential. The conclusion falls on a final value estimate of $720.18 per share. Thus, suggesting a buy recommendation.