On April 21, 2020, Netflix, Inc. (Nasdaq: NFLX), the world’s leading movie and TV-show streaming entertainment service company, announced it had added 15.8 million new subscribers as a large fraction of the population was confined at home due to the COVID-19 pandemic. At the same time, Netflix stock was up +34% year to date, making it one the few companies to see its shares appreciate since the coronavirus crisis started. But the company was still recording negative free cash flows due to large investments in new content, and it was already trading at a higher multiple than other big tech peers. What should have been the valuation of Netflix stock price? 

In this interactive sample class, we will explore the challenges of valuing young, rapidly growing but often still unprofitable technology firms. We will use “Netflix, Inc. in the COVID-19 Era: Valuing a High-Growth Subscription-Based Business” (University of Virginia Darden School) to: 

• illustrate the mechanics and highlight the challenges of discounted cash flow (DCF) valuation, 
• suggest an alternative valuation framework based on “unit economics” and “customer lifetime value” (LTV),
• evaluate whether customer stock price is reasonable given customer lifetime value and total addressable market.

Confirmed participants will be given an abridged version of "Netflix, Inc. in the COVID-19 Era: Valuing a High-Growth Subscription-Based Business" case in advance and are required to review the case prior to attending the class. Participants might be called to answer the questions or participate in the sample class like the interactive class we typically have.

There will be an introduction to MSGF program during the sample class.