Perform a prospective fcf-based valuation analysis

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Assignment

1. What is the right mix of investment and strategic focus for Netflix when allocating fixed resources to either the legacy DVD-by-mail business or the relatively more trendy online streaming business? Possible answers include: Focus ex-clusively on the DVD-by-mail business, focus exclusively on the online streaming business, or specify a per-centage of investment into each of the two businesses.

2. Recommend whether Brooks should buy more, sell, or continue to hold Netflix stock? Possible answers include: Sell your full holding immediately, sell a por-tion of your holding now and wait until the end of the year to decide whether or not to sell the rest, continue to hold the same amount as be-fore, or invest even more heavily in the company.

3. Analyze trends in both the history of Netflix stock performance and growth rates in subscriber counts.

4. Evaluate the revenue and expense streams for Netflix, and any interaction between these two measures, in the context of the recent shift in cor-porate strategy.

5. Perform a prospective FCF-based valuation analysis. Do you agree with the strategy of Netflix to split the company's business into two separate segments?

6. Discuss whether the overall company level estimate for ‘cost of capital' will vary from the estimates for each of the two business types separately.

7. What motivated Netflix to split its business into Qwikster for DVDs and Netflix for streaming?

8. Discuss how Netflix might improve the processes of both communicating key product changes to consumers, and/or networking with cable TV channels, TV providers, and Holly-wood studios.

9. Assess the impact of key competitors on the future outlook of Netflix, and the changing cost structure of these companies when paying for up-grades in the quality and quantity of content offered online.

10. What other qualitative issues may have a substantial impact on the fu-ture viability of Netflix and both the DVD and streaming access models?

Reference no: EM131354646

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