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April 11, 2019

Stock Rating:

Sell

Analysts

Yiqin Zou yiqin-zou@uiowa.edu

Russell Kong yifan-kong@uiow.edu

Investment Thesis

We recommend a SELL rating for Netflix because competition in the media

entertainment industry has risen, and Netflix’s unfavorable cash flow

increases the risk to pay off their debt, thus, destroying Netflix’s competitive

advantage in the industry. With the target price of $320 - $328, the current

stock appears to be overvalued.

Drivers of Thesis Unfavorable economic outlook – A decaying real GDP growth at

around 1.8% has the possibility to cause economic crisis in the next five

years, which will deter consumer spending on Netflix, thus, lowering

Netflix’s revenue growth worldwide.

Huge debts and negative cash flow cause inability to finance content –

We forecast a negative free cash flow through 2020 and material debt

issuances through 2028 due to increasing production of original

content and acquisition of licensed content.

Entry of media giants and change of landscape in the industry – Apple,

AT&T, Amazon, and Disney are going to pose threats to Netflix by

producing original content, which will lower domestic membership

growth at rates between 2-9%, and decrease revenue growth at rates

between 6-20% by forcing a lower membership fee.

Risks to Thesis Data mining on consumer preference from content library creates

competitive advantage – Netflix has a relatively huge content

library in the industry, in which they can attract target consumers

by doing data analysis on their preferences. We expect Netflix will

survive by lowering cost of content assets in the long term.

Global market with great opportunity – We believe that streaming

services will be popular worldwide through 2028. The global

subscribers will increase at a rate between 5-38% until population

saturation.

Target Price: $320 - 328

Current Price $ DCF / EP Model $

367.65 324.44

Stock Performance Highlights

52wk High $ 52wk Low $ Beta (5 yr. Avg.)

423.21 231.23

1.68

Share Highlights

Market Cap (M) $ Shares Outstanding (M) EPS (2019E) $ P/E Forward

160.5 436.6

4.97 89.8

Company Performance Highlights

ROA ROE Current Ratio Debt to Equity Ratio Profit Margin

6.82% 28.20%

1.82 3.13

38.87%

Company Description

Netflix (NASDAQ: NFLX) is the world's leading internet-based entertainment service provider with 139 million paid memberships in over 190 countries. Members can watch TV shows, documentaries and movies with different genres and languages, in anytime and anywhere at least on an internet-connected device. Additionally, there were over two million members in the U.S. subscribe to the domestic DVD service.

Relative Financial Performance

Earnings Estimates

Year 2017 2018 2019E 2020E 2021E

EPS 1.13 2.59 4.97 8.23 12.24 Growth 274% 130% 92% 66% 49%

12 Month Performance

Figure 1: (figures on first page) YCharts

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On the behalf of the University of Iowa Krause Fund analysts, our team recommends a SELL rating for Netflix, Inc. The rating is based on all investment positives and negatives which we discussed in the following report from the macroeconomic, industry, and company-specific perspectives. Netflix currently dominates the video streaming industry in the United States and is expanding globally. However, Netflix’s unfavorable cash flow and large debt, as well as the heated competition in the industry, is going to pose increasing threats to Netflix’s sustainable growth and dominance in the industry. Therefore, we conclude that the current stock price is overvalued. The target price of Netflix’s stock will fall between $320 and $328, so we recommend a SELL rating.

U.S. Real GDP & Consumer Spending A future potential economic downturn will negatively impact Netflix, as well as the movies & entertainment industry. It is essential for us to project Netflix’s domestic revenue growth through the trend of real GDP growth as real GDP represents the level of consumer spending. Real GDP of a country is a critical economic indicator, defined as an inflation-adjusted measure that reflects the total market value of all finished goods and services in a country within a given year. The real GDP indicates the condition of overall economy for a country. From the figure, despite a continual increase in the real GDP in the United States from 2012 to 2017, we believe the U.S. GDP growth rate will continue to increase. However, from 2019 to 2020, we believe the real GDP will experience a decrease at the rate of approximately 1.5% to 2.5%. We also believe the real GDP will have a negative growth and the economy will go into recession in the next three years.

Figure 2: Statista 1

Consumer spending on goods and services is a key factor on the real GDP growth as it contributes nearly 70% of total U.S. production2. There are two categories of consumer spending including durable goods, and nondurable goods and services, such as Netflix. The growth of real GDP largely influences spending on both durable and nondurable goods and services. As figure 3 shows below, during the 2008 recession, spending on durable goods and nondurable goods and services have decreased by 12 % and 4% 3 . Therefore, with the economic downturn, there will be less impact on nondurable streaming services like Netflix and other companies in the movie & entertainment industry compared to durable products like cars and other energy goods due to lower costs and consumer satisfaction.

Figure 3: FRED3

However, a 4% decrease on nondurable goods spending from a recession is essential for us to forecast Netflix’s domestic revenue growth as we are predicting a potential economic downturn in three years. Therefore, we predict a 15-20% growth in Netflix’s domestic revenue from 2019 to 2021.

Since the United States is one of the world’s strongest economies, a U.S. economic downturn will result in global economic downturn. The international segment of Netflix is now a growing segment. Hence, due to global economic downturn, we expect that the diminishing of international spending on Netflix and other nondurable entertainment goods and services in the industry will cause decrease in the international growth, from 23-39% in three years.

Executive Summary

Economic Outlook

Figure 4: Revenue Decomposition Model

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Unemployment Rate Unemployment rate is also an important factor that can impact Netflix and the movie & entertainment industry. A low unemployment rate indicates that the economy and labor force is performing well. In the five years since recovering from the 2008 financial crisis, the average unemployment rate was around 5%. In 2018, data showed the unemployment rate had decreased to approximately 4%4. Furthermore, the labor force participation rate was at 63.1%, and the employment-population ratio was 60.6%. Both measures were up by 0.4% over the year5. We can see from figure 5 that the unemployment rate is floating between 4-5%, which is lower compared to past years.

Figure 5: Statista4

The low unemployment rate is a good indicator for Netflix and the movie & entertainment industry because lower unemployment rates suggest that there will be an increase in the number of people who receive a stable income, which can lead more people to purchase Netflix services and subscriptions. Thus, we believe the labor force is going to be stable around 4-5%, and the economy of the industry will continue to be healthy until early 2020. Our optimism is driven by a tax cut policy that will act as a stimulus to the healthy economic environment. However, in the long term, we believe there will be an increase in the unemployment rate at about 5.2% in 2021 due to inflation and a slow increase in the real GDP. The unemployment rate will impact Netflix and the movie & entertainment industry since this will directly decrease the purchasing power of these households. Thus, there will be fewer households purchasing Netflix subscription services, which will cause a decrease in Netflix revenues.

U.S. Fed Fund Rate As figure 6 shows below, in November 2018, the Federal Reserve raised the Fed Fund rate to 2.5% 6 , which was its highest since 2016. Meanwhile, the 10-year treasury yield also increased to nearly 2.5% 7 , and we believe that the Federal Reserve will continue to raise the interest yield before 2020 to lower the inflation growth.

The interest hike leads to higher cost of debt for Netflix, as well as its peers in the movies & entertainment industry. Since Netflix is holding $10,360 million of long-term debt in 2018, a higher 10-year treasury yield gives Netflix pressure in purchasing the interest payment before paying out all its future debt. In addition, it also increases the risk for Netflix to finance its future licensed content through long-term debt due to higher cost of debt. Therefore, we forecast a growing amount of interest expense as a percentage between 4-5% of Netflix’s long-term debt in the next 5 years.

Figure 6: Fed Fund Rate - Trading Economics 6

Figure 7: U7i.S. 10 Year Treasury Yield – Market Watch7

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Inflation Rate & Personal Income Growth Rate Netflix may adjust plans and pricing according to the local market changes including inflation and local taxes8. An increasing inflation rate will cause the real GDP to decrease and negatively impact the whole economy in every industry due to decreased spending on goods and services. People cannot purchase as much as they used to buy, but this situation can be mitigated if the personal income increases. Disposable Personal Income indicates the total amount of money, which is tax adjusted, and is available to the individual or households to use and spend. After the economy recession in 2008, the income of US households is at a low level, but now, the income is back to the pre-recession level, which is a good sign for Netflix and its industry. The income gain has continued to grow in the past 5 years, according to FRED9. The growth of disposable personal income shows the ability of customers to purchase things beyond durable goods, like nondurable goods and services. The inflation rate measures changes in the prices paid for goods and services. The 5-year average inflation rate is 0.3%. In 2018, inflation rate increased to 0.4%10. Thus, we believe that the inflation rate is going to be 0.5%, which is quite stable, before 2020. However, it will increase to 0.5-0.7% in early 2020 due to potential economic downturn. The personal income growth versus inflation of all items shows that they are almost positively correlated. Netflix adjusts plans and pricing according to the inflation rate because individuals have more power to purchase their plan when the economy is healthy. However, Netflix does not have the ability to continue raising the pricing of the plans due to the existing limit of inflation and income growth. We are confident about the income growth before 2020, and customers are willing to purchase the goods and services in the movies and entertainment industry. However, we view slowdown of GDP after 2 years, as a result of the rise of the inflation rate and slowdown of the economy and income growth rate.

Corporate Tax Rate The corporate tax was cut from 35% to 21% after January 1, 2018, according to the Tax Cuts and Jobs Act of 2017 11. As we discussed above, the tax rate is another factor for Netflix’s price change. A higher tax rate may increase Netflix’s monthly subscription fees. However, we believe a lower corporate tax rate cannot last long due to the large amount of national debt. The national debt refers to the amount of money borrowed by a country to cover budget deficits. President Donald Trump cut the tax and increased spending (to build walls) which led to a national debt of $21 trillion, a 100% increase in national debt compared to President Barack Obama’s period 12 . Large increase in national debt puts pressure on national GDP, and we expect the government will increase the corporate rate to 27% or more in 2020 to cover the debt budget. Thus, the increase in tax rate will likely result in a price increase in Netflix’s monthly plans, which will deter consumers from purchasing the subscription.

Industry Overview Global Industry Classification Standard (GICS) has newly classified Netflix in the movie & entertainment sub-industry which is in the media industry of the communication sector. The feature of this category is the online video streaming. The online video producer began with YouTube, and Netflix became the first online movie streaming. As time went by, more and more companies entered this category and started to provide online videos and movies, including Amazon Prime, Disney, Hulu, and HBO. Apple TV is also planning to enter this industry. With the increasing development, online streaming became more convenient and attracted more and more people. People can get access of the services via multiple devices, like phones, PCs. The advantage of online video streaming over the traditional television is that the users can choose what they want to watch and what they are interested in without barriers. The trend of the online video streaming is still increasing and has become a norm in daily life. Moreover, there are other sub-industries included in the media industry category, such as cable & satellite, broadcasting, interactive home entertainment, etc. Companies in those industries also compete with Netflix for the users’ free time. Figure 8: Disposable Personal Income vs. CPI – FRED 9

Industry Analysis

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Figure 9: Statista 13

The primary way for the movie & entertainment industry to earn revenue is from membership fees and advertising. Excluding YouTube, most big video streaming companies like Netflix and Disney do not post advertisements for members when streaming videos. Figure 9 above shows the revenue growth in the video streaming market in U.S., which has a steady growth from 2017 to 2019. However, the Statista analysts forecasted a decaying growth rate from 2019 to 2023 13. We believe this analysis is true because membership-based companies earn revenue largely restricted by geographic population. Thus, a global market is attractive to Netflix and all other video streaming companies in the industry.

Service / Products Licensed Content The companies usually partner with many content providers to have the rights to allow members to access a variety of shows and movies for a certain period. Licensed content usually accounts for the majority of the total content. Figure 10 below depicts the large market of content production due to continuous growth from 2012 to 201814.

Original Content

The trend is moving toward producing original content in the movie & entertainment industry. The original content production is becoming extremely imperative for Netflix and its peers such as Amazon Prime, Disney, Hulu, and Apple TV. According to figure 11 below, Netflix produced 56 new original series which were released worldwide compared to Amazon’s and Hulu’s 23 and 8 in 2017 15 , which depicts a leadership of Netflix in the industry before the year 2017.

Netflix’s spending on original content has increased 108% to $6 million from 2017 to 2018. Currently, Netflix’s original content is about 30% of its total contents16.

Owning original content benefits the companies in several aspects including unlimited membership access to content, reducing annual costs of licensing, fewer risks from contract termination in the long-run, and increasing the ability to do data analysis from the large databases. High-quality original content with lower costs are what all companies in the movie & entertainment industry seek.

Figure 10: Statista 14

Figure 11: Statista 15

Figure 12: Statista 16

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Recent Development Increased Cord-cutting The number of traditional pay-TV subscribers shrunk 4.2% in 2018, compared to 3.7% in 2017 and 2% in 201617. Comcast, AT&T, and Verizon lost their pay-TV customers while streaming video services like Netflix and Hulu have had annual increases in subscribers. Internet Connections The trend of online video streaming is still increasing and has become a norm in our daily life. The internet users in the USA have been indeed increasing in recent years and will continue to increase in the future. The users of the internet increased from $264.6 million to $274.9 million from 2017 to 2018, a rate of 3.89%. The estimated number of increasing rates from 2018 to 2019 is 3.56% and from 2019 to 2020 is 3.23%. We can predict that the rate will be consistent at 3% to 4% and will not fluctuate very much18. The increasing number of users will keep generating revenues for the industry.

Political factors The internet can provide a lot of services and products to the users. Internet users can find almost all the information they need. Any internet access or website will be used by the connecter all around the world, even some small website. Chinese consumers cannot use some of the major products Americans use, such as Chrome, YouTube, or Instagram. China is an important component in the world economy. The restriction of the Chinese market in our industries can cause the United States lose potential benefits. This political restriction is not likely to change in future 3 years based on our forecast.

Industry Competitions Number of Subscribers The graph below indicates the number of subscribers of some of the major competitors in the movie and entertainment industry. We can easily see from figure 14 that Netflix has more than two times the number of subscribers than the second-best player, Amazon. The number of Amazon subscribers is expected to be 59.97 million in 201919 , which indicates that Netflix has the competitive advantage compared to other major players.

Monthly Subscription Fees Netflix has three plans for the customers, which are basic, standard and premium. The basic plan is $8.99 per month, the standard is $12.99, and the premium is $15.9920. Amazon Video was first launched in 2006. With the expanded library, it added memberships and Prime videos. As time went by, Prime Video expanded to the global stage. Then, more and more countries in the world received access to Amazon, and it became the second largest video streaming platform in the world. Amazon Prime costs $100 per year. In terms of monthly memberships, it is about $8 per month. Compared to Netflix, Amazon also has globalization but has a healthy cash flow and cheaper membership fees than Netflix that can make it expand its services and products to more countries and attract more customers. Hulu is mainly focused on television shows, and now, Hulu generated new television streaming for sports fans, which can help it attract new customers. A regular Hulu subscription is $5.99 per month. If customers want to enjoy live TV, the monthly fee is $44.99 21 . The online video fee is cheaper than both Netflix and Amazon, which can be an advantage for Hulu. However, if customers want to enjoy live TV, it is not worth buying the memberships. The biggest disadvantage for Hulu is that it can only be accessed in the US and thus has smaller global market shares.

Figure 14: Statista

Figure 13:Statista19

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Competition in Users Free Time Besides the competition within the industry, the competition for users’ free time across industries is also a big concern. When customers have a lot of free time, they have a lot of choices, too. They can spend the time on video games, spend time on TVs and spend time on their mobile phones. Of course, they can also spend on online video surfing. If customers choose to spend their time on other things, the online video will have less time to be clicked.

Peer Analysis Netflix’s peer companies we selected from the industry are Viacom, Fox, CBS, Amazon, Disney, AT&T, and Apple. The main reason is that they are content streaming companies. Some of them are from multi-industries such as Amazon, AT&T and Apple. As a result of low barriers of the movie & entertainment industry, Amazon, AT&T and Apple are all trying to eat pieces of the cake. Amazon spent almost $6 billion on its licensed and original content in 201822 . AT&T’s acquisition of Time Warner provides unlimited entertainment with HBO Plus on consumer’s wireless plan, including free seasons of Game of Throne 23 . Apple is going to produce original shows and movies from Apple TV coming 2019 fall24. Apple Music also competes in filling the free time of consumers. Those are the reasons why we included Amazon, AT&T and Apple in the peer analysis.

2018 Media Industry Net Income Figure 16 shows the average annual net income for the U.S. media industry in 2018 is around $13 billion, which indicates that this is a very profitable industry. Apple, as a major player, drives up the whole industry revenue. Disney, as a well-known original content producer, has a net income approximately 9 times the size of Netflix’s net income.

2018 Media Industry EBITDA Figure 17 shows each company’s operating performance without the financing factor, interest, and tax influences. Netflix still represents the lowest margin in the media industry due to its large spending on cost of goods sold. Apple is still performing as a leader. Amazon has had constant growth of EBITDA during the past 4 years. The operating performance in the industry without Amazon, AT&T and Apple does not seem to have any outstanding performance since their EBITDA YOY growth rates are approximately zero.

2018 Media Industry Debt-to Equity Ratio Figure 15 shows the historical annual debt-to-equity ratio in the media industry. The average industry debt-to-equity is about 1.1. It indicates that the companies prefer to use debt to purchase their content which carries high risks due to contract termination. Netflix has a very high debt-to-equity ratio of about 2.0. Thus, it holds a higher risk compares to its peers. We expect Netflix is going to carry a lower debt-to-equity ratio at around 1.0 in 5 years due to decreasing debt.

Figure 15: YCharts

Figure 16: YCharts

Figure 17: YCharts

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2018 Media Industry Free Cash Flow (Quarterly) Figure 18 shows the historical annual free cash flow in the media industry. The average industry free cash flow is about $ 1 billion dollars. It indicates the operating cash amount after the companies pay for their capital expenditures and operating expense. Netflix has a very negative free cash flow of about -$1.3 billion which depicts it is in the introduction stage and spends a lot of cash doing investments. Holding a negative cash flow is not necessarily bad, but there is a high risk to pay off debt and reverse the cash flow number. Most players in the industry have a positive free cash flow, however, they still cannot beat the three “A” top players. Additionally, we expect a positive free cash flow for Netflix in 3 years as a result of decreasing in liability and increasing in assets. 2018 Media Industry P/E Ratio Figure 19 shows the historical P/E ratio in the media industry. The average industry P/E ratio is approximately 40x while Netflix is holding a P/E ratio of more than 130x, which suggest that investors are anticipating high expectation for Netflix compare to other companies in the industry. We expect a lower P/E ratio for Netflix in 3 years at around 40x because we believe Netflix is now overvalued and no one can be the very top player in the media industry.

Porter’s Five Forces Threat of New Entrants: High The internet-based entertainment service is in high demand currently, so the threat of new entrants is high and increasing. Lots of competitors are seeking ways to provide attractive contents to customers to generate more profits. Power of Suppliers: High Lots of Netflix’s contents are depend on suppliers but Netflix is trying to produce more original content which will reduce their number of suppliers in the future. Power of Buyers: Low The internet-based entertainment services are in rapid growth so there is huge prospect in this industry. Netflix currently steps into the virtual reality world and attracts more subscribers. Threat of Substitutes: High There are many free or paid streaming sites people who want more than Netflix, including HBO, Hulu, Amazon Prime, Acorn, Crunchyroll, etc. And the number of substitutes is still increasing. Competition in the Industry: High Netflix has major competitors like Amazon, Apple, AT&T, and YouTube. We believe Amazon, Apple, and AT&T are biggest competitors because they all have healthy cash flows and they are trying to produce original contents to increase their subscribers. In addition, we believe YouTube is also a competitor because it produces many free channels and it is not limited by subscribers. It competes with Netflix in the moment of free time.

Corporate Strategy Netflix’s strategy is to focus on domestic and international streaming service growth by meeting consumer preferences and expectations. Besides that, Netflix focuses on the diversification of their goods and services. Netflix’s multi-year goal is to significantly grow its content while increasing their revenue to expand operating margins.

Business segments

Netflix has three reportable business segments: domestic

streaming, international streaming, and domestic DVD.

Based on these three segments, Netflix derives revenues

from monthly membership services.

Figure 18: YCharts

Figure 19: YCharts

Company Analysis

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(Source: Netflix 10k)

Due to their global expansion, Netflix saw a larger increase in revenue for their international streaming segment compared to domestic streaming from 2017-2018. The international streaming revenue accounts for about 43.5% of total revenue in 2017, and 49.3% in 2018. Domestic streaming revenue accounts for about 52.6% of total revenue in 2017, and 48.4% in 2018. We believe the revenue from their domestic DVD segment will continue to decrease, as it accounted for about 2.3% of total revenue in 201825. We anticipate that Netflix will maintain their DVD service until it shuts down in 2028. The revenues in the next three years are projected to be $323.55, $286.34 and $257.7 million. After the next three years, international streaming revenue is predicted to be consistent at about 20% and will not fluctuate very much. The growth revenue of domestic streaming is also consistent at about 20%. Based on our forecast, the growth revenue of DVD will decrease by about 10%. Based on revenue, Netflix will focus less on its domestic DVD segment because cost of revenue of the total sales from this segment, including delivery expenses, will begin to increase again after 2019. In 2019, the percentage of cost to the revenue is 42%, and in 2020, it is 43% and will be consistent at 45% in future years. Netflix cannot generate enough profits from the DVD segment because of the decrease in revenues and the increase in costs.

Risk factors

The primary risk of Netflix is the changes in the competitive offerings. If the competitive companies change their prices and their products qualities, it will bring a negative effect to Netflix. Netflix has three plans for the customers, which are basic, standard and premium. The basic plan is $8.99 per month, the standard is $12.99, and the premium is $15.9926.

Amazon Video has a membership plan of $100 per year, which is an $8 per month. However, Amazon is holding a healthier cash flow and the membership fees are cheaper than Netflix, which make it a competitive advantage in the media industry. Hulu subscription is of $5.99 per month. For live TV, the monthly fee is $44.9927. The online video fee is cheaper than both the Netflix and Amazon, If Netflix’s investment in the original content is still increasing, it will negatively impact Netflix because if Netflix always buy the new contents, it will have an unhealthier cash flows, this will impede the operation of Netflix, and Netflix will not have enough cash to broaden its services worldwide.

Globalization Globalization growth is an important factor that will impact Netflix. Up to 2017, Netflix had market in over 19025 countries. The revenue from the international streaming exceed domestic streaming in 2018. In the industry, lots of companies have globalization, such as Amazon, Apple, but the international market of Netflix is unique. Netflix has different strategies in different countries. India India is one of the three top international markets of Netflix. India is estimated to have 500 million smartphone users and 650 million internet users by the year 202028. If one household only need to buy one subscription, India will have 162.5 million of internet users up to 2020. In 2020, India will have 1,389 million of people 29 . Use the same assumption, only one subscriber in a household, India will have 347.3 million of people. We can see that, over 46% of the population use the internet, India is a highly potential market. The problem is that, India has slow Internet speed and high data surfing cost. This becomes a disadvantage because lots of people do not have the ability to enjoy high quality contents. Netflix provided a “Open Connect” program30 to help the India market. “Open Connect” is a program that Netflix partner with the ISPS to provide high quality contents efficient to the India market in order to get ride the slow Internet. This strategy helped the India market to continue develop because as mentioned above, the users of internet and smartphone will continue to increase at a steady growth rate. The program can retain the users and attracts more customers. The program gives Netflix advantage and makes it hard to be copied. Besides the “Open Connect” program, Netflix is willing to spend nearly $300 million on India focused contents. Comparing to the $75 million spent by Amazon, it is a huge surpass31. This investment can further help Netflix to attract more customers, and this investment looks like have a healthy and positive prospect because Netflix is focusing on generating an India-specialized comedy to try to monopoly the India market32.

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Canada Canada is also a very important global market for Netflix. The number of subscribers of Netflix in Canada is also in a high percentage and is still increasing. 57% of the Canadian household 33 who had internet subscriptions said they had streamed Netflix in the past month, from 48% in earlier 201834. This popular is also related with the strategy Netflix has in Canada. Netflix has Canadian French-language contents for the Canadian. Besides the language subtitle strategy, Netflix also invested $500 million Canadian in Canadian production invested in the Canadian created contents 35 . Both strategies attracted Canadian to keep subscribing Netflix and brings Netflix advantages in the Canadian market. As the world population continues to increase, the Canadian market will continues to increase as well. The continuing broaden in Canada will broaden the penetration.

Large amount of Debt Debt payment is also a very important factor that will impact the operations of Netflix. At the end of 2018, according to Netflix’s 10-K, Netflix had total amount of $10,449 debt that need to be paid in the future. To better understand the operation of Netflix, we need to test whether it can pay off the debt or not. The revenue of Netflix is increasing every year, but in a decreasing rate, as mentioned above. The continue investing in the contents lead Netflix to pay much amount of money every year. Mentioned above, Netflix has lots of different strategies in its global markets and invested huge amount of money in them. All these cash outflows surpassed the revenue generating and caused a negative cash flow of Netflix. Besides the negative cash flow, the interest rate is also a crucial factor that need to be considered. The interested rate will increase in the future, the increasing in the interest will lead the debt amount to increase, which continues to increase the barrier of debt paying. Combing all the factors, it seems like Netflix does not have the abilities to pay off all the debts. If Netflix cannot pay the debts, it needs to refinance these debts to test the values again. If doing so, Netflix will have more debts in addition to the debts that already exist. Indeed, Netflix has some ways to pay off debts. If Netflix cut down the investments in the contents, and use these cash to pay the debts, it can be a useful way. However, this way cannot be rational. If Netflix give up the investing, it will losses its main revenue streaming, the subscribers will choose other platforms to enjoy the contents they like to watch. Thus, Netflix will lower its revenue if it does that. So, in the short run, the debt cannot be paid off and the unhealthy cash flow will be worse. In the long run, Netflix can have bigger ability to pay the debt based on the huge amount of the revenue it generates.

Economic downturn We anticipate that the future economic downturn will negatively impact Netflix as well. Similar to the 2008 economic recession, the future economic downturn will not have huge impacts on the non-durable goods and services because they can easily stop operating. However, the economic recession will affect the profitability of Netflix indeed. When economic recessions happen, the value of currency will decrease. It means that, people cannot use the same amount of the money to buy the products and services as they did before. Thus, customers will not like to buy the subscriptions and memberships as they did before because they need to pay more. The decreasing in the memberships will negatively impact the revenue of Netflix and the profitability as well.

Consumer database Another advantage Netflix has is the database it has about its customers. Netflix can track the history of customers and provide the contents they prefer to watch. For example, if one member prefers to watch fiction films like Marvel series. Netflix will look at his surfing history and will know that he likes these series. The next time this customer stream Netflix, it will recommend some science fiction movies to the customers to help him be more convenient in choosing the contents. This technology can help customers in choosing their interests topics. Other than track the history of the customer database, Netflix also use this data mining to get feedback from customers and makes progress in their contents. Netflix will see how customers think about the series of movies they like. After collecting data, Netflix notices the best way from them to make benefit is releasing the whole seasons of the movies in one time 36 . The predicting of what customers like and scheduling the products are main ways Netflix use to keep track of the customer’s tastes.

SWOT Analysis Strength: Strong brand name. Netflix is the largest streaming in the world, with presence over 190 countries. Has more subscribers than the combination of all the other similar company. Original content. Netflix provides lots of original videos and programs that are available for the customers. Weakness: Continual investments in the original content. While the contents of Netflix bring it the advantage, the increasing cost in supporting and developing new contents can lead to negative cash flow, which is unhealthy for the company’s business.

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Large spending on debt. While Netflix is owing so much debt, it increases the risk for Netflix to pay off the large amount of debt to a positive cash flow. Opportunity Worldwide service. Netflix has a strong global market, which brings it the competitive advantages comparing to other video streaming platforms Growth in technology. Netflix innovates its technology frequently. For example, the videos in Netflix have subtitles in different languages, so, people from different countries can watch them easier. Threats Increased competition. The main threat of Netflix is the competition. Some similar company, such as Amazon and Hulu, all have huge market shares. Inflation in the market. The inflation will impact the GDP and thus impacts the Netflix industry.

Revenue Decomposition

Domestic DVD

DVD is an old-fashioned product in the current market. In 2018, domestic DVD revenue represents only 2% of Netflix’s total revenue. Therefore, we forecast continual decrease in domestic DVD revenue, cost of revenue, and total DVD paid membership. We anticipate that DVD segment will be shut down in 2028 and the subsequent year when the total number of DVD subscribers drops below 0.3 million and the percentage of DVD revenue out of total Netflix revenue drops below 0.3% in 2028.

Domestic Streaming

We forecast Netflix’s domestic streaming revenue based on total domestic paid membership and monthly membership fees because Netflix’s domestic streaming revenue is solely calculated from domestic membership fees multiplied by total domestic memberships. When forecasting the total domestic paid membership, the annual domestic membership growth is what we consider. We anticipate the domestic membership growth rate, which shows 11% in 2018, is increasing at a lower rate throughout our forecast horizon due to market saturation. At the end of 2028, the total paid domestic memberships reach about 86 million people, which is reasonable. Because the predicted total population in United States is around 350 million36. Assuming the average number of people in one household is four, and every household subscribes Netflix, then the maximum number of domestic subscribers will be 87.5 million, and our forecast of 86 million is within the range.

For average monthly membership fees, despite of the effect of inflation and tax rate, we believe the fees will be less likely to increase because competition has heated up in the industry, and Netflix will try to lower its price to remain competitive. Therefore, based on our forecast for the above factors, we believe the domestic streaming revenue is going to increase at a decreasing rate, and the growth rate remain constant at 6% in 2028.

International Streaming

We forecast the international paid membership based on the percentage of global population minus the U.S. population. When estimating the maximum global memberships, we assume that there will be 5 billion people worldwide except some countries in Asia including China in 202836. And one person in each household of average of four will have Netflix. And half of the world population is still in developing country or developing areas, which Netflix is hard to reach. Consequently, there will be a maximum of 625 million people worldwide has a potential to subscribe Netflix. Our estimate of 427 million is within this range, which is totally reasonable.

Valuation Discussion

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Cost of Revenue

Cost of revenue of domestic streaming segment and international streaming segment primarily consists on content expenses and amortization expenses. We forecast cost of revenues for domestic and international segment based on the decreasing percentage of sales from each segment. We assume that Netflix is going to spend more cash on both licensed and original content but at a decreasing growth rate, according to the chart below. We assume that the cost of revenue for DVD is 42%, a constant percentage of DVD revenue until DVD segment shutdown in 2028.

Content Library

Content Assets

Netflix’s content asset is like the heart of Netflix, which includes current content assets and non-current content asset. The current content asset is primarily Netflix’s licensed content which is due in one year. Non-current content asset is their produced original content which has a long-lasting life. The cash and debt are like the energy and blood to the heart. Netflix need large amount of cash and debt to a huge content library to attract consumers.

We believe the amount of content will continue to grow since Netflix will license and produce more contents. However, the content growth rate will decrease because we anticipate there will be increasing competition in the market.

Amortization Expense Netflix uses a double declining method to amortize their content which is accelerating. Thus, we believe that Netflix’s amortization expenditure is going to increase. We anticipate that the amortization expense will increase at the rate between 26-30% in the next five years, and it will be decreased to the rate of 5% in 2028. In the long term, we believe there will be heated competition in the market, and Netflix has built its own content library to avoid large spending on licensed contents including amortization expenses.

Long-term Debt

Netflix has to spend more cash to produce and acquire content assets. Therefore, in the short-term, we believe the long-term debt is going to increase. However, in the long term, possibly around 2024, we expect Netflix will consider paying off its debt through decaying payments in content assets, thus the long-term debt will decrease a little bit but still large. We are worried about if Netflix can pay off its debt in the future because the decaying payments in content assets is not reasonable for Netflix to be competitive in the media industry.

Capitalized PV of licensed content We utilized capitalized present value of licensed content in our calculation for invested capital. In 2018, the capitalized PV of licensed content was $14081.46 million compared to $1219.7 million of capitalized PV of operating leases. This account represents a huge profitability of Netflix’s performance in the long term. In our forecast, we expect the capitalized PV of licensed content will continue to grow but at a decreasing rate due to increasing risk in debt payment and building of original content library.

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Cost of equity

Beta: 1.68 Risk-free Rate: 2.50% Equity Risk Premium: 4.95% Cost of Equity: 10.82% We used the CAPM method to calculate cost of equity. We used the 10-year treasury yield as the risk-free rate. For the equity risk premium, we used 4.95%, which came from the Henry Fund analysts this year because the rate is about the average of all the forecast and it is less biased. Therefore, we got 10.82% for Netflix’s cost of equity.

Cost of debt

Pre-tax Cost of Debt: 5.88% Marginal Tax Rate: 27% After Tax Cost of Debt: 4.29% To calculate Netflix’s pre-tax cost of debt, we used the default spread of Netflix’s 10-year corporate bond plus the risk-free rate. We assume the marginal tax rate is 27%. We found the after-tax cost of debt to be 4.29%.

WACC Weights

MV of Equity: $160063.78 million MV of Debt: 11587.67 million Netflix’s market value of equity was calculated by taking its current price per share $367.65 multiplied by current shares outstanding, which is 435.37 million. It comes up a total market value of equity of $160064 million. The market value of debt is calculated by adding current long-term debt and present value of operating lease together, it gives us the value of $ 11588 million. Therefore, the weight of equity and the weight of debt equal to 93.25% and 6.75%, which end up a WACC of approximately 10.375%.

Valuation Model We believe the intrinsic value of $324.44 from DCF/EP model is more representative than the DDM or relative valuation model because Netflix has no dividend payout and its peers in the industry are quite varied from maturity.

Discounted Cash Flow and Economic Profit Valuation Model (DCF/EP) We believe that the DCF and EP models can best reflect our expectation on Netflix’s long-term sustainability. The DCF and EP model reported an adjusted intrinsic value of $324.44. We believe this intrinsic value is the most accurate due to accounting for firm-specific cash flows in the long-term growth. Cash flow is a very essential factor in the Netflix business. Cash flow also can reflect Netflix’s long-term profitability.

Dividend Discount Model (DDM) The DDM gives us an intrinsic value of 225.91. We do not believe this represents Netflix’s stock value because Netflix is not paying any dividend to its shareholders, and we believe Netflix is not going to issue dividend in the future. Therefore, the DDM model is less accurate in predicting no dividend companies like Netflix. Relative Valuation In this model, we compare Netflix with its peers including Amazon, Disney, Twenty-First Century Fox, CBS, and Viacom. The model gives us the forecasted average P/E ratio in 2019 and 2020, which are $112.88 and $146.04. We do not believe this model gives a representative value for Netflix. One of the reasons is that Netflix generates revenue both in the United States and overseas such as in Canada and India. However, not all of its peers have a global service like Netflix. Another reason is that its peers are varied from maturity. Amazon has a huge market of online retail and membership services, thus, it is more mature than Netflix. Apple is also less likely to be a relative peer to compare in the model because its services in different industries. However, Viacom is a very small company owning a small market share. Other competitors like Hulu does not even own a market share. Hence, we do not believe this model better reflect Netflix’s stock price.

Beta vs Risk Premium In order to better understand the impact of market volatility on the stock price, the way is to check the relationships between the Beta and the risk premium number. Beta measures the risk of a stock in the market. The estimated value of Netflix’s beta is 1.68, which indicates that, the risk of the stock is highly related with the increasing volatility. As Netflix grows, the Beta will decrease. In our model, we concluded and predicted that, a 0.05 increase in the Beta will influence the stock price to change between $ 0.17 and $0.18. The equity risk premium indicates the risk the market will face. According to the Henry Fund analysts, we estimated that the equity risk is 4.95%. According to the model, if we use the 5.03% risk premium with the same 1.68 Beta, the stock price will be 0.11 higher than the target price. Generally, a 0.04% increase or decrease in the risk premium causes a $0.05-$0.06 in the price change in our model.

WACC vs CV Growth Rate The relationships between the changes in the WACC and the changes in the growth rate can indicate a better understanding of the impacts of Netflix’s debt to equity structure. WACC measures the costs and risks of all of the Netflix’s sources of capital. The value of WACC we projected is 10.39%. The growth rate reflected the growth rate of the company in the long-term. We assume the growth rate to be 3.75%. Furthermore, in deep analysis, a 0.15% change in the growth rate will cause a $5-$7 changes in the price. Turn to the WACC, a 0.2% changes in the WACC will lead to a 12% to 19% in the stock prices.

Sensitivity Analysis

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Pre-Tax Cost of Debt Vs Growth Rate The tax amount that need to be paid is also a crucial point in the analysis, to define the effect of tax, we tested the pre-tax cost of debt and its relationship with the growth of the stock in our model. We predicted the cost of debt is at a rate of 5.88% and found that a 0.1% changes in the cost of debt will cause a $0.09 to $0.1 changes in the stock price if we keep the projected growth rate same at -2.15%. Mention growth rate, a 0.8% changes in the growth rate will lead a $7.5 to $7.51 changes in the stock price. We easily concluded that, both of these two factors do not have large effects on the intrinsic value of the stock. Risk Free Rate vs Marginal Tax Rate Risk free rate can be defined as the rate of return on the assets that do not have risk. We tested risk free rate to better understand the effect of the return on the stock. The rate of return is 2.5%. We saw from the model that a 0.04% changes in the return will cause a $0.02-$0.03 changes in the stock price. If we changed the tax rate that Netflix needs to pay by $2, and keeps the same risk free rate that we used before, the stock will change at 0.3% to 0.71%. The changes in tax rate will indeed have impacts on the stocks but it is not a large amount. Licensed Content Growth Vs Growth Rate As mentioned, Netflix invested large amount of the cash to the contents. So, test the effect of the contents and the changes or them is also very important. Under this purpose, we tested the content growth rate of Netflix. The increasing rate of the licensed content is 27%, and a 1% change in the rate will cause a 34% to 35% changes in the stock. Along with the growth rate, if Netflix own the same rate of the contents, a 0.8% decrease of increases will cause a $7.5 change in the stock price. We can summary that, both of these two factors are huge related to the stock prices, and cause huge differences in the stock.

Important Disclaimer

This report was created by students enrolled in the Security Analysis (6F:112) class at the University of Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

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1 Real gross domestic product (GDP) growth rate in the United States from 2012 to 2022 (compared to the previous year). (n.d.). Retrieved from https://www-statista-com.proxy.lib.uiowa.edu/statistics/263614/gross-domestic-product-gdp-growth-rate-in-the-united-states/ 2 Amadeo, K. (n.d.). Four Critical Components of America's Economic Growth. Retrieved from https://www.thebalance.com/components-of-gdp-explanation-formula-and-chart-3306015 3 The FRED® Blog. (n.d.). Retrieved from https://fredblog.stlouisfed.org/2018/08/dips-in-durables-and-nondurables/ 4 Unemployment rate in the United States from 1990 to 2018. (n.d.). Retrieved from https://www-statista-com.proxy.lib.uiowa.edu/statistics/193290/unemployment-rate-in-the-usa-since-1990/ 5 United States Unemployment Rate. (n.d.). Retrieved from https://tradingeconomics.com/united-states/unemployment-rate 6 United States Fed Funds Rate. (n.d.). Retrieved from https://tradingeconomics.com/united-states/interest-rate 7 U.S. 10 Year Treasury Note - TMUBMUSD10Y Overview. (n.d.). Retrieved from https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx 8 Why did my Netflix price change? (n.d.). Retrieved from https://help.netflix.com/en/node/62990 9 Real Disposable Personal Income. (2019, March 29). Retrieved from https://fred.stlouisfed.org/series/DSPIC96#0 10 CPI Home. (n.d.). Retrieved from https://www.bls.gov/cpi/ 11 Murray, J. (n.d.). Learn About Corporate Tax Rates and How to Calculate What You Owe. Retrieved from https://www.thebalancesmb.com/corporate-tax-rates-and-tax-calculation-397647 12 Amadeo, K. (n.d.). Trump Pledged to Eliminate the Debt. Instead He Will Add $8.3 Trillion. Retrieved from https://www.thebalance.com/trump-plans-to-reduce-national-debt-4114401

13 Video Streaming (SVoD). (n.d.). Retrieved from https://www-statista-

com.proxy.lib.uiowa.edu/outlook/206/109/video-streaming--svod-/united-states#market-revenue 14 Number of movies released in the United States and Canada from 2000 to 2018. (n.d.). Retrieved from https://www-statista-com.proxy.lib.uiowa.edu/statistics/187122/movie-releases-in-north-america-since-2001/ 15 Number of new digital original series released worldwide from 2011 to 2017, by streaming service. (n.d.). Retrieved from https://www-statista-com.proxy.lib.uiowa.edu/statistics/805278/original-series-new-releases/ 16 Netflix's content assets worldwide from 2016 to 2018, by type (in million U.S. dollars). (n.d.). Retrieved from https://www-statista-com.proxy.lib.uiowa.edu/statistics/881673/netflix-content-assets/ 17 Spangler, T., & Spangler, T. (2019, February 13). Cord-Cutting Sped Up in 2018: Biggest Pay-TV Ops Shed 3.2 Million Subscribers Last Year. Retrieved from https://variety.com/2019/biz/news/cord-cutting-2018-accelerate-us-pay-tv-subscribers-1203138404/ 18 Internet usage in U.S. Retrieved from https://www.statista.com/study/24290/internet-usage-in-the-united-states-statista-dossier/ 19 Leading video subscription services in the United States in 2017, by number of subscribers (in millions). (n.d.). Retrieved from https://www-statista-com.proxy.lib.uiowa.edu/statistics/185390/leading-cable-programming-networks-in-the-us-by-number-of-subscribers 20 Choose the plan that's right for you. (n.d.). Retrieved from https://www.netflix.com/signup/planform 21 Stream TV and Movies Live and Online. (n.d.). Retrieved from https://www.hulu.com/welcome?orig_referrer=https://www.google.com/ 22 Richter, F. (2017, April 10). The Billion-Dollar Race for Streaming Supremacy. Retrieved April 16, 2019, from https://www-statista-com.proxy.lib.uiowa.edu/chart/8908/video-content-budget-amazon-netflix/ 23 AT&T Includes HBO on Your Unlimited Wireless Plan. (2017, April 05). Retrieved from https://about.att.com/story/unlimited_wireless_plan_hbo.html 24 Apple TV. (n.d.). Retrieved from https://www.apple.com/tv/

References

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25 Revenue composition of Netflix https://d18rn0p25nwr6d.cloudfront.net/CIK-0001065280/a6bf9700-eab8-4e15-96cd-391c961e6240.pdf 26 Choose the plan that's right for you. (n.d.). Retrieved from https://www.netflix.com/signup/planform

27 Stream TV and Movies Live and Online. (n.d.). Retrieved from https://www.hulu.com/welcome?orig_referrer=https://www.google.com/ 28 Brennan, L. (2018, October 12). How Netflix Expanded to 190 Countries in 7 Years. Retrieved from https://hbr.org/2018/10/how-netflix-expanded-to-190-countries-in-7-years 29 Team, T. (2017, May 15). Here's How Netflix Is Looking To Drive Growth In India. Retrieved from https://www.forbes.com/sites/greatspeculations/2017/05/15/heres-how-netflix-is-looking-to-drive-growth-in-india/#44cc6d572472 30 Population Pyramids of the World from 1950 to 2100. (n.d.). Retrieved from https://www.populationpyramid.net/india/2020/

31 Jackson, E. (2018, April 17). Netflix doing booming business in Canada, industry research reports suggest. Retrieved from https://business.financialpost.com/telecom/media/netflix-doing-booming-business-in-canada-industry-research-reports-suggest 32 Heritage, C. (2018, December 21). Launch of Netflix Canada: A recognition of Canada's creative talent and its strong track record in creating films and television. Retrieved from https://www.newswire.ca/news-releases/launch-of-netflix-canada-a-recognition-of-canadas-creative-talent-and-its-strong-track-record-in-creating-films-and-television-648509133.html 33 https://d18rn0p25nwr6d.cloudfront.net/CIK-0001065280/a6bf9700-eab8-4e15-96cd-391c961e6240.pdf 34 Admin. (n.d.). Data mining in Entertainment. Retrieved from http://misclassblog.com/data-analytics/data-mining-in-entertainment/ 35 Population Pyramids of the World from 1950 to 2100. (n.d.). Retrieved from https://www.populationpyramid.net/india/2020/ 36 Population Pyramids of the World from 1950 to 2100. (n.d.). Retrieved from https://www.populationpyramid.net/india/2020/

NetflixRevenue Decompositionin MillionsFiscal Years Ending Dec. 31 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CV Total RevenueRevenues $ 8,830.67 $ 11,692.71 $ 15,794.34 20,153.58$ 24,940.05$ 29,703.60$ 34,589.85$ 38,913.23$ 42,800.66$ 46,862.45$ 50,841.07$ 54,140.65$ 57,064.25$

Growth rate 30% 32% 35% 28% 24% 19% 16% 12% 10% 9% 8% 6% 5%Cost of revenues 6,257.46 8,033.00 9,967.54 12195.89 14382.59 16293.94 17800.40 18817.24 19740.80 20763.31 21698.51 22402.23 22953.06

Cost of revenues % of sales 71% 69% 63% 61% 58% 55% 51% 48% 46% 44% 43% 41% 40%Marketing 1,097.52 1,436.28 2,369.47 2,792.69 3,260.26 3,695.16 4,188.91 4,586.43 4,938.71 5,230.88 5,448.31 5,584.08 5,610.30

Cost of marketing % of sales 12% 12% 15% 14% 13% 12% 12% 12% 12% 11% 11% 10% 10%Contribution profit (loss) 1,475.69 2,223.43 3,457.33 5,165.00 7,297.20 9,714.51 12,600.53 15,509.56 18,121.15 20,868.25 23,694.25 26,154.34 28,500.89 Contribution margin 17% 19% 22% 26% 29% 33% 36% 40% 42% 45% 47% 48% 50%

Total paid memberships at the end of period 93.12 113.97 141.97 176.73 211.20 243.93 276.86 308.70 338.03 363.38 387.00 408.28 426.66Growth rate 17% 22% 25% 24% 20% 16% 14% 12% 10% 8% 7% 6% 5%

Average monthly revenue per membership 7.90 8.55 9.27 9.50 9.84 10.15 10.41 10.50 10.55 10.75 10.95 11.05 11.15 Growth rate 11% 8% 8% 8% 7% 6% 5% 4% 4% 3% 3% 2% 2%

Domestic StreamingRevenues $ 5,077.31 $ 6,153.03 $ 7,646.65 9,069.11 10,724.22 12,327.00 13,662.99 14,864.85 16,050.25 17,104.79 18,302.78 19,382.35 20,486.07

Growth rate 21% 21% 24% 19% 18% 15% 11% 9% 8% 7% 7% 6% 6%Cost of revenues 2,951.97 3,470.86 4,038.39 4,634.44 5,321.56 5,865.82 6,230.14 6,209.69 6,317.06 6,436.63 6,509.55 6,496.65 6,426.86

Cost of revenues % of sales 58% 56% 53% 51% 50% 48% 46% 42% 39% 38% 36% 34% 31%Marketing 412.93 603.75 1,025.35 1,228.79 1,467.12 1,662.82 1,885.01 2,063.89 2,222.42 2,353.90 2,451.74 2,512.84 2,524.63

Cost of marketing % of sales 8% 10% 13% 14% 14% 13% 14% 14% 14% 14% 13% 13% 12%Contribution profit (loss) 1,712.41 2,078.42 2,582.90 3,205.89 3,935.55 4,798.36 5,547.84 6,591.27 7,510.77 8,314.27 9,341.49 10,372.87 11,534.58 Contribution margin 33.73% 33.78% 33.78% 35% 37% 39% 41% 44% 47% 49% 51% 54% 56%

Total paid memberships at the end of period 47.91 52.81 58.49 63.63 68.49 72.58 75.42 77.61 79.54 80.96 82.58 84.19 86.08Growth rate 7% 10% 11% 9% 8% 6% 4% 3% 2% 2% 2% 2% 2%

Average monthly revenue per membership $ 8.83 $ 9.71 $ 10.90 11.88 13.05 14.15 15.10 15.96 16.82 17.61 18.47 19.19 19.83 Growth rate 13% 10% 12% 9% 10% 8% 7% 6% 5% 5% 5% 4% 3%

International StreamingRevenues $ 3,211.10 $ 5,089.19 $ 7,782.11 10,769.33 13,938.12 17,125.42 20,696.33 23,832.25 26,545.09 29,562.07 32,351.00 34,577.09 36,578.18

Growth rate 64% 58% 53% 38% 29% 23% 21% 15% 11% 11% 9% 7% 6%Cost of revenues 3,042.75 4,359.62 5,776.05 7,429.09 8,944.39 10,322.62 11,473.44 12,516.78 13,337.51 14,244.54 15,110.30 15,829.47 16,526.20

Cost of revenues % of sales 95% 86% 74% 69% 64% 60% 55% 53% 50% 48% 47% 46% 45%Marketing 684.59 832.54 1,344.12 1,563.91 1,793.15 2,032.34 2,303.90 2,522.54 2,716.29 2,876.99 2,996.57 3,071.25 3,085.66

Cost of marketing % of sales 21% 16% 17% 15% 13% 12% 11% 11% 10% 10% 9% 9% 8%Contribution profit (loss) (516.24) (102.96) 661.94 1,776.33 3,200.58 4,770.46 6,918.98 8,792.94 10,491.29 12,440.54 14,244.13 15,676.37 16,966.32 Contribution margin -16% -2% 9% 16% 23% 28% 33% 37% 40% 42% 44% 45% 46%

Total paid memberships at the end of period 41.19 57.83 80.77 110.95 141.11 170.14 200.51 230.34 257.87 281.93 304.03 323.79 340.58Growth rate 37% 40% 40% 37% 27% 21% 18% 15% 12% 9% 8% 6% 5%

Average monthly revenue per membership $ 6.50 $ 7.33 $ 8.03 8.09 8.23 8.39 8.60 8.62 8.58 8.74 8.87 8.90 8.95 Growth rate 20% 13% 9% 1% 2% 2% 3% 0% -1% 2% 1% 0% 1%

Domestic DVDRevenues $ 542.27 $ 450.50 $ 365.59 315.14 277.72 251.19 230.53 216.13 205.33 195.59 187.28 181.21 0.00

Growth rate -16% -17% -19% -14% -12% -10% -8% -6% -5% -5% -4% -3% 0%Cost of revenues 262.74 202.53 153.10 132.36 116.64 105.50 96.82 90.77 86.24 82.15 78.66 76.11 0.00

Cost of revenues % of sales 48% 45% 42% 42% 42% 42% 42% 42% 42% 42% 42% 42% 0%Marketing - - -

Cost of marketing % of sales - - -Contribution profit (loss) 279.53 247.97 212.49 $182.78 $161.07 $145.69 $133.71 $125.35 $119.09 $113.44 $108.62 $105.10 $0.00Contribution margin 52% 55% 58% 58% 58% 58% 58% 58% 58% 58% 58% 58% 0%

Total paid memberships at the end of period 4.03 3.33 2.71 2.15 1.60 1.22 0.93 0.76 0.62 0.50 0.39 0.31 0.00Growth rate -18% -17% -19% -21% -25% -24% -24% -19% -17% -20% -22% -21% 0%

Average monthly revenue per membership $ 11.22 $ 11.27 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ 11.26 $ - Growth rate 2% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

NetflixIncome Statementin MillionsFiscal Years Ending Dec. 31 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVRevenues 8,830.67 11,692.71 15,794.34 20,153.58 24,940.05 29,703.60 34,589.85 38,913.23 42,800.66 46,862.45 50,841.07 54,140.65 57,064.25

Cost of revenues 6,029.90 7,659.67 9,967.54 12,195.89 14,382.59 16,293.94 17,800.40 18,817.24 19,740.80 20,763.31 21,698.51 22,402.23 22,953.06

Depreciation & Amortization 57.53 71.91 83.16 123.53 171.59 222.86 279.43 329.42 372.16 423.84 473.82 510.15 537.95

Gross profit 2,743.24 3,961.14 5,743.65 7,834.16 10,385.88 13,186.80 16,510.01 19,766.57 22,687.71 25,675.30 28,668.74 31,228.28 33,573.24

Expenses:

Marketing expenses 991.08 1,278.02 2,369.47 2,792.69 3,260.26 3,695.16 4,188.91 4,586.43 4,938.71 5,230.88 5,448.31 5,584.08 5,610.30 Technology & development expenses 852.10 1,052.78 1,221.81 1,531.29 1,876.37 2,203.78 2,520.43 2,773.34 2,965.22 3,139.71 3,277.05 3,343.33 3,383.06General & administrative expenses 577.80 863.57 630.29 763.21 905.90 1,018.71 1,117.56 1,179.03 1,212.74 1,242.06 1,259.57 1,250.17 1,226.44

Operating income (loss) 322.27 766.77 1,522.07 2,746.96 4,343.35 6,269.16 8,683.11 11,227.76 13,571.03 16,062.64 18,683.81 21,050.69 23,353.44

Other Income (expenses):

Interest expense 150.11 238.20 420.49 543.96 675.80 800.20 918.66 1,009.75 1,079.51 1,148.14 1,208.48 1,245.45 1,268.71Interest & other income (expense) 30.83 (115.15) 41.73 - - - - - - - - - -

Income (loss) before income taxes 202.98 413.41 1,143.30 2,203.00 3,667.55 5,468.96 7,764.45 10,218.02 12,491.52 14,914.51 17,475.33 19,805.24 22,084.73

Provision for (benefit from) income taxes 73.83 (73.61) 15.22 19.42 24.03 28.62 33.32 37.49 41.23 45.15 48.98 52.16 54.97

Net income (loss) 129.15 487.02 1,128.09 2,183.59 3,643.52 5,440.34 7,731.13 10,180.53 12,450.29 14,869.36 17,426.35 19,753.08 22,029.76

Shares outstanding - basic 428.82 431.89 435.37 438.96 442.55 444.63 444.63 444.63 444.63 444.63 444.63 444.63 444.63Earnings per share - basic 0.30$ 1.13$ 2.59$ 4.97$ 8.23$ 12.24$ 17.39$ 22.90$ 28.00$ 33.44$ 39.19$ 44.43$ 49.55$

(Netflix does not report dividend)

NetflixBalance Sheetin MillionsFiscal Years Ending Dec. 31 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVAssetsCurrent assets:

Cash & cash equivalents 1,467.58 2,822.80 3,794.48 4,215.90 5,359.23 8,519.88 11,697.46 17,686.49 25,631.84 35,864.51 48,486.72 63,856.37 81,773.83

Short-term investments 266.21 - - - - - - - - - - - -

Current content assets, net 3,726.31 4,310.93 5,151.19 7,431.38 9,221.63 11,008.44 12,707.67 14,160.19 15,419.01 16,711.73 17,943.77 18,903.83 19,707.06

Other current assets 260.20 536.25 748.47 954.97 1,170.89 1,381.47 1,593.52 1,775.51 1,934.01 2,097.04 2,252.97 2,375.71 2,479.41

Total current assets 5,720.29 7,669.97 9,694.14 12,602.25 15,751.75 20,909.78 25,998.65 33,622.19 42,984.85 54,673.28 68,683.46 85,135.91 103,960.30

Property and equipment:

Property & equipment, gross 544.60 641.22 786.80 949.26 1,121.56 1,287.44 1,459.18 1,609.56 1,740.25 1,905.40 2,066.75 2,199.56 2,316.43

Less: accumulated depreciation 294.21 321.81 368.52 436.66 515.92 592.22 671.22 740.40 800.52 876.48 950.70 1,011.80 1,065.56

Total property & equipment, net 250.40 319.40 418.28 512.60 605.64 695.22 787.96 869.16 939.74 1,028.91 1,116.04 1,187.76 1,250.87

Non-current content assets, net 7,274.50 10,371.06 14,960.95 17,743.56 21,946.67 26,076.80 30,262.58 33,874.86 37,035.26 40,298.33 43,430.94 45,907.17 48,006.81

Other non-current assets 341.42 652.31 901.03 1,136.49 1,390.24 1,636.73 1,884.05 2,095.17 2,277.97 2,465.47 2,644.03 2,783.24 2,899.80

Total assets 13,586.61 19,012.74 25,974.40 31,994.90 39,694.30 49,318.53 58,933.24 70,461.38 83,237.82 98,466.00 115,874.47 135,014.08 156,117.79

Liabilities and Stockholders' EquityLiabilities

Current liabilities:

Current content liabilities 3,632.71 4,173.04 4,686.02 4,783.49 5,031.63 5,393.41 5,652.56 5,723.17 5,665.42 5,582.76 5,451.06 5,224.35 4,955.82

Accounts payable 312.84 359.56 562.99 668.08 768.88 851.63 922.31 964.96 987.06 1,005.08 1,014.08 1,004.30 984.44

Accrued expenses 197.63 315.09 477.42 572.63 694.46 810.56 925.02 1,019.83 1,099.27 1,179.52 1,254.07 1,308.75 1,351.83

Deferred revenue 443.47 618.62 760.90 912.65 1,061.64 1,194.87 1,314.90 1,405.29 1,476.12 1,551.56 1,615.95 1,652.00 1,688.97

Total current liabilities 4,586.66 5,466.31 6,487.32 6,936.86 7,556.62 8,250.48 8,814.79 9,113.24 9,227.87 9,318.92 9,335.17 9,189.40 8,981.06

Non-current content liabilities 2,894.65 3,329.80 3,759.03 5,057.16 6,007.91 6,869.21 7,679.22 8,293.49 8,757.13 9,204.65 9,586.68 9,800.50 9,916.54

Long-term debt 3,364.31 6,499.43 10,360.06 12,098.83 14,233.05 16,648.42 17,132.32 17,547.98 17,281.35 17,087.59 16,659.47 15,971.26 15,133.88

Other non-current liabilities 61.19 135.25 129.23 158.30 188.06 215.02 240.38 259.61 274.12 288.13 300.09 306.78 310.41

Total liabilities 10,906.81 15,430.79 20,735.64 24,251.15 27,985.64 31,983.13 33,866.71 35,214.31 35,540.47 35,899.29 35,881.41 35,267.94 34,341.89

Stockholders' Equity

Common stock 1,599.76 1,871.40 2,315.99 2,637.38 2,958.77 3,145.18 3,145.18 3,145.18 3,145.18 3,145.18 3,145.18 3,145.18 3,145.18

Accumulated other comprehensive income (loss) (48.57) (20.56) (19.58) (19.58) (19.58) (19.58) (19.58) (19.58) (19.58) (19.58) (19.58) (19.58) (19.58)

Retained earnings (accumulated deficit) 1,128.60 1,731.12 2,942.36 5,125.95 8,769.47 14,209.81 21,940.94 32,121.47 44,571.75 59,441.11 76,867.46 96,620.54 118,650.30

Total stockholders' equity (deficiency) 2,679.80 3,581.96 5,238.77 7,743.75 11,708.66 17,335.41 25,066.53 35,247.06 47,697.35 62,566.71 79,993.06 99,746.14 121,775.90

Total liabilities and stockholders' equity 13,586.61 19,012.74 25,974.40 31,994.90 39,694.30 49,318.53 58,933.24 70,461.38 83,237.82 98,466.00 115,874.47 135,014.08 156,117.79

NetflixCash Flow Statementin MillionsFiscal Years Ending Dec. 31 2015 2016 2017 2018Cash flows from operating activities:

Net income (loss) 122.64 186.68 558.93 1,211.24

Adjustments to reconcile net income to net cash:

Additions to streaming content assets (5,771.65) (8,653.29) (9,805.76) (13,043.44)

Change in streaming content liabilities 1,162.41 1,772.65 900.01 999.88

Amortization of streaming content assets 3,405.38 4,788.50 6,197.82 7,532.09

Amortization of DVD content assets 79.38 78.95 60.66 41.21

Depreciation & amortization of property, equipment & intangibles 62.28 57.53 71.91 83.16

Stock-based compensation expense 124.73 173.68 182.21 320.66

Excess tax benefits from stock-based compensation (80.47) (65.12) - -

Other non-cash items 31.63 40.91 57.21 40.43

Foreign currency remeasurement loss (gain) on long-term debt - - 140.79 (73.95)

Deferred taxes (58.66) (46.85) (208.69) (85.52)

Changes in operating assets and liabilities:

Other current assets 18.69 46.97 (234.09) (200.19)

Accounts payable 51.62 32.25 74.56 199.20

Accrued expenses 48.81 68.71 114.34 150.42

Deferred revenue 72.14 96.75 177.97 142.28

Other non-current assets & liabilities (18.37) (52.29) (73.80) 2.06

Net cash flows from operating activities (749.44) (1,473.98) (1,785.95) (2,680.48)

Cash flows from investing activities:

Purchases of property & equipment (91.25) (107.65) (173.30) (173.95)

Acquisition of DVD content assets (77.96) (77.18) (53.72) (38.59)

Other assets (1.91) (0.94) (6.69) (126.59)

Purchases of short-term investments (371.92) (187.19) (74.82) -

Proceeds from sale of short-term investments 259.08 282.48 320.15 -

Proceeds from maturities of short-term investments 104.76 140.25 22.71 -

Net cash flows from investing activities (179.19) 49.77 34.33 (339.12)

Cash flows from financing activities:

Proceeds from issuance of debt 1,500.00 1,000.00 3,020.51 3,961.85

Issuance costs (17.63) (10.70) (32.15) (35.87)

Proceeds from issuance of common stock 77.98 36.98 88.38 124.50

Excess tax benefits from stock-based compensation 80.47 65.12 - -

Principal payments of lease financing obligations (0.55) - - -

Other financing activities - 0.23 0.26 (1.96)

Net cash flows from financing activities 1,640.28 1,091.63 3,076.99 4,048.53

Effect of exchange rate changes on cash, cash equivalents & restricted cash (15.92) (9.17) 29.85 (39.68)

Net increase (decrease) in cash, cash equivalents & restricted cash 695.72 (341.75) 1,355.22 989.25

Cash, cash equivalents & restricted cash, beginning of year 1,113.61 1,809.33 1,467.58 2,822.80

Cash, cash equivalents & restricted cash, end of year 1,809.33 1,467.58 2,822.80 3,812.04

NetflixCash Flow Statementin MillionsFiscal Years Ending Dec. 31 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVCash flows from operating activities:Net income (loss) 2,183.59 3,643.52 5,440.34 7,731.13 10,180.53 12,450.29 14,869.36 17,426.35 19,753.08 22,029.76

Depreciation and amortization 68.14 79.26 76.31 79.00 69.17 60.12 75.97 74.22 61.09 53.76

Adjustments to reconcile net income to net cash:

Changes in Current content assets, net (2,280.20) (1,790.24) (1,786.81) (1,699.23) (1,452.52) (1,258.82) (1,292.72) (1,232.04) (960.05) (803.23)

Changes in Other current assets (206.50) (215.92) (210.58) (212.05) (181.99) (158.50) (163.03) (155.93) (122.74) (103.70)

Changes in Other non-current assets (235.46) (253.74) (246.49) (247.32) (211.11) (182.81) (187.50) (178.56) (139.22) (116.56)

Changes in Current content liabilities 97.47 248.14 361.77 259.15 70.61 (57.75) (82.66) (131.70) (226.71) (268.53)

Changes in Accounts payable 105.10 100.80 82.75 70.67 42.65 22.10 18.02 9.00 (9.78) (19.87)

Changes in Accrued expenses 95.22 121.83 116.10 114.46 94.81 79.45 80.25 74.55 54.68 43.08

Changes in Deferred revenue 151.75 148.99 133.23 120.03 90.39 70.83 75.44 64.40 36.04 36.97

Changes in Other non-current liabilities 29.07 29.76 26.96 25.36 19.23 14.51 14.01 11.96 6.69 3.63

Net cash provided by (used in) operating activities 8.18 2,112.39 3,993.58 6,241.20 8,721.75 11,039.43 13,407.13 15,962.24 18,453.08 20,855.32

Cash flows from investing activities:Purchases of property & equipment (162.46) (172.29) (165.89) (171.74) (150.37) (130.70) (165.15) (161.35) (132.81) (116.87)

Non-current content assets (2,782.60) (4,203.12) (4,130.13) (4,185.78) (3,612.28) (3,160.40) (3,263.07) (3,132.60) (2,476.24) (2,099.64)

Net cash provided by (used in) investing activities (2,945.06) (4,375.41) (4,296.02) (4,357.52) (3,762.65) (3,291.09) (3,428.22) (3,293.95) (2,609.04) (2,216.51)

Cash flows from financing activities:Long-term debt 1,738.77 2,134.22 2,415.38 483.89 415.67 (266.64) (193.76) (428.11) (688.21) (837.38)

Non-current content liabilities 1,298.14 950.75 861.29 810.02 614.26 463.64 447.52 382.03 213.82 116.04

Common Stock 321.39 321.39 186.41 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Foreign currency, unrealized gain (loss) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Net cash provided by (used in) financing activities 3,358.30 3,406.36 3,463.08 1,293.91 1,029.93 197.00 253.76 (46.08) (474.39) (721.34)

Changes in cash & cash equivalents 421.41 1,143.34 3,160.64 3,177.58 5,989.03 7,945.35 10,232.68 12,622.21 15,369.65 17,917.47

Beginning cash & cash equivalents 3,794.48 4,215.90 5,359.23 8,519.88 11,697.46 17,686.49 25,631.84 35,864.51 48,486.72 63,856.37

Ending cash & cash equivalents 4,215.90 5,359.23 8,519.88 11,697.46 17,686.49 25,631.84 35,864.51 48,486.72 63,856.37 81,773.83

NetflixCommon Size Income StatementPercent of SalesFiscal Years Ending Dec. 31 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVRevenues 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Cost of revenues 70.86% 68.70% 63.11% 60.51% 57.67% 54.86% 51.46% 48.36% 46.12% 44.31% 42.68% 41.38% 40.22%

Depreciation and Amortization 0.65% 0.62% 0.53% 0.61% 0.69% 0.75% 0.81% 0.85% 0.87% 0.90% 0.93% 0.94% 0.94%Gross profit 31.06% 33.88% 36.37% 38.87% 41.64% 44.39% 47.73% 50.80% 53.01% 54.79% 56.39% 57.68% 58.83%

Expenses:

Marketing expenses 11.22% 10.93% 15.00% 13.86% 13.07% 12.44% 12.11% 11.79% 11.54% 11.16% 10.72% 10.31% 9.83%Technology & development expenses 9.65% 9.00% 7.74% 7.60% 7.52% 7.42% 7.29% 7.13% 6.93% 6.70% 6.45% 6.18% 5.93%General & administrative expenses 6.54% 7.39% 3.99% 3.79% 3.63% 3.43% 3.23% 3.03% 2.83% 2.65% 2.48% 2.31% 2.15%

Operating income (loss) 3.65% 6.56% 9.64% 13.63% 17.42% 21.11% 25.10% 28.85% 31.71% 34.28% 36.75% 38.88% 40.92%

Other Income (expenses):

Interest expense 1.70% 2.04% 2.66% 2.70% 2.71% 2.69% 2.66% 2.59% 2.52% 2.45% 2.38% 2.30% 2.22%Interest & other income (expense) 0.35% -0.98% 0.26% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Income (loss) before income taxes 2.30% 3.54% 7.24% 10.93% 14.71% 18.41% 22.45% 26.26% 29.19% 31.83% 34.37% 36.58% 38.70%

Provision for (benefit from) income taxes 0.84% -0.63% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%

Net income (loss) 1.46% 4.17% 7.14% 10.83% 14.61% 18.32% 22.35% 26.16% 29.09% 31.73% 34.28% 36.48% 38.61%

NetflixCommon Size Balance SheetPercent of SalesFiscal Years Ending Dec. 31 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVAssets

Current assets:

Cash & cash equivalents 16.62% 24.14% 24.02% 20.92% 21.49% 28.68% 33.82% 45.45% 59.89% 76.53% 95.37% 117.95% 143.30%Short-term investments 3.01% - - . - - - - - - - - -

Current content assets, net 42.20% 36.87% 32.61% 36.87% 36.98% 37.06% 36.74% 36.39% 36.03% 35.66% 35.29% 34.92% 34.53%Other current assets 2.95% 4.59% 4.74% 4.74% 4.69% 4.65% 4.61% 4.56% 4.52% 4.47% 4.43% 4.39% 4.34%

Total current assets 64.78% 65.60% 61.38% 62.53% 63.16% 70.39% 75.16% 86.40% 100.43% 116.67% 135.09% 157.25% 182.18%Property and equipment:

Property & equipment, gross 6.17% 5.48% 4.98% 4.71% 4.50% 4.33% 4.22% 4.14% 4.07% 4.07% 4.07% 4.06% 4.06%Less: accumulated depreciation 3.33% 2.75% 2.33% 2.17% 2.07% 1.99% 1.94% 1.90% 1.87% 1.87% 1.87% 1.87% 1.87%Total property & equipment 2.84% 2.73% 2.65% 2.54% 2.43% 2.34% 2.28% 2.23% 2.20% 2.20% 2.20% 2.19% 2.19%

Non-current content assets, net 82.38% 88.70% 94.72% 88.04% 88.00% 87.79% 87.49% 87.05% 86.53% 85.99% 85.42% 84.79% 84.13%Other non-current assets 3.87% 5.58% 5.70% 5.64% 5.57% 5.51% 5.45% 5.38% 5.32% 5.26% 5.20% 5.14% 5.08%

Total assets 153.86% 162.60% 164.45% 158.76% 159.16% 166.04% 170.38% 181.07% 194.48% 210.12% 227.92% 249.38% 273.58%

Liabilities and Stockholders' Equity

Liabilities

Current liabilities:

Current content liabilities 41.14% 35.69% 29.67% 23.74% 20.17% 18.16% 16.34% 14.71% 13.24% 11.91% 10.72% 9.65% 8.68%Accounts payable 3.54% 3.08% 3.56% 3.31% 3.08% 2.87% 2.67% 2.48% 2.31% 2.14% 1.99% 1.85% 1.73%Accrued expenses 2.24% 2.69% 3.02% 2.84% 2.78% 2.73% 2.67% 2.62% 2.57% 2.52% 2.47% 2.42% 2.37%Deferred revenue 5.02% 5.29% 4.82% 4.53% 4.26% 4.02% 3.80% 3.61% 3.45% 3.31% 3.18% 3.05% 2.96%

Total current liabilities 51.94% 46.75% 41.07% 34.42% 30.30% 27.78% 25.48% 23.42% 21.56% 19.89% 18.36% 16.97% 15.74%Non-current content liabilities 32.78% 28.48% 23.80% 25.09% 24.09% 23.13% 22.20% 21.31% 20.46% 19.64% 18.86% 18.10% 17.38%Long-term debt 38.10% 55.59% 65.59% 60.03% 57.07% 56.05% 49.53% 45.10% 40.38% 36.46% 32.77% 29.50% 26.52%Other non-current liabilities 0.69% 1.16% 0.82% 0.79% 0.75% 0.72% 0.69% 0.67% 0.64% 0.61% 0.59% 0.57% 0.54%

Total liabilities 123.51% 131.97% 131.29% 120.33% 112.21% 107.67% 97.91% 90.49% 83.04% 76.61% 70.58% 65.14% 60.18%

Stockholders' Equity

Common stock 18.12% 16.00% 14.66% 16.70% 18.73% 19.91% 19.91% 19.91% 19.91% 19.91% 19.91% 19.91% 19.91%

Accumulated other comprehensive income (loss) -0.55% -0.18% -0.12% -0.15% -0.15% -0.15% -0.15% -0.15% -0.15% -0.15% -0.15% -0.15% -0.15%Retained earnings (accumulated deficit) 12.78% 14.81% 18.63% 25.43% 35.16% 47.84% 63.43% 82.55% 104.14% 126.84% 151.19% 178.46% 207.92%

Total stockholders' equity (deficiency) 30.35% 30.63% 33.17% 38.42% 46.95% 58.36% 72.47% 90.58% 111.44% 133.51% 157.34% 184.24% 213.40%

Total liabilities and stockholders' equity 153.86% 162.60% 164.45% 158.76% 159.16% 166.04% 170.38% 181.07% 194.48% 210.12% 227.92% 249.38% 273.58%

Netflix

Value Driver Estimationin MillionsFiscal Years Ending Dec. 31 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CV

NOPLAT

EBITARevenues 8,830.67 11,692.71 15,794.34 20,153.58 24,940.05 29,703.60 34,589.85 38,913.23 42,800.66 46,862.45 50,841.07 54,140.65 57,064.25

Less:

Cost of revenue 6,029.90 7,659.67 9,967.54 12,195.89 14,382.59 16,293.94 17,800.40 18,817.24 19,740.80 20,763.31 21,698.51 22,402.23 22,953.06

Marketing expenses 991.08 1,278.02 2,369.47 2,792.69 3,260.26 3,695.16 4,188.91 4,586.43 4,938.71 5,230.88 5,448.31 5,584.08 5,610.30

Technology & development expenses 852.10 1,052.78 1,221.81 1,531.29 1,876.37 2,203.78 2,520.43 2,773.34 2,965.22 3,139.71 3,277.05 3,343.33 3,383.06

General & administrative expenses 577.80 863.57 630.29 763.21 905.90 1,018.71 1,117.56 1,179.03 1,212.74 1,242.06 1,259.57 1,250.17 1,226.44

Add: Implied interest on PV operating leases

Beginning PV of operating leases 387.14 473.63 571.79 1227.61 1504.43 1777.49 2040.40 2312.58 2550.90 2758.03 3019.77 3275.48 3485.96

Pre-tax cost of debt 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88%

Total Implied interest on PV operating leases 22.74 27.83 33.59 72.12 88.39 104.43 119.87 135.86 149.87 162.03 177.41 192.43 204.80

Total EBITA 402.54 866.50 1,638.82 2,942.62 4,603.33 6,596.44 9,082.42 11,693.04 14,093.05 16,648.51 19,335.04 21,753.27 24,096.19

Less: Adjusted TaxesTax rate 43.40% 27.83% 26.21% 27% 27% 27% 27% 27% 27% 27% 27% 27% 27%

Total current tax provision (benefit) 73.83 (73.61) 15.22 19.42 24.03 28.62 33.32 37.49 41.23 45.15 48.98 52.16 54.97

Add:Tax on operating lease interest expense 9.87 7.74 8.80 19.47 23.86 28.20 32.37 36.68 40.46 43.75 47.90 51.96 55.30

Tax shield on interest expense 65.15 66.29 110.21 146.87 182.47 216.05 248.04 272.63 291.47 310.00 326.29 336.27 342.55

Less:Tax on interest income (expense) 13.38 (32.05) 10.94 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Adjusted Taxes 135.47 32.48 123.30 185.76 230.36 272.87 313.73 346.80 373.16 398.89 423.17 440.39 452.82

Plus: Change in Deferred TaxesDeferred tax provision (46.85) (208.69) (85.52) (84.66) (83.82) (82.98) (82.15) (81.33) (80.52) (79.71) (78.91) (78.12) (77.34)

Total Change in Deferred Taxes (46.85) (208.69) (85.52) (84.66) (83.82) (82.98) (82.15) (81.33) (80.52) (79.71) (78.91) (78.12) (77.34)

NOPLAT 220.22 625.34 1,430.00 2,672.20 4,289.15 6,240.60 8,686.54 11,264.91 13,639.37 16,169.91 18,832.96 21,234.76 23,566.03

Invested Capital

Net Operating Working CapitalCurrent Operating Assets

Normal cash (12% of sales) 1,059.68 1,403.13 1,895.32 2,418.43 2,992.81 3,564.43 4,150.78 4,669.59 5,136.08 5,623.49 6,100.93 6,496.88 6,847.71

Current content assets, net 3,726.31 4,310.93 5,151.19 7,431.38 9,221.63 11,008.44 12,707.67 14,160.19 15,419.01 16,711.73 17,943.77 18,903.83 19,707.06

Other current assets 260.20 536.25 748.47 954.97 1,170.89 1,381.47 1,593.52 1,775.51 1,934.01 2,097.04 2,252.97 2,375.71 2,479.41

Less: Current Operating LiabilitiesCurrent content liabilities 3,632.71 4,173.04 4,686.02 4,783.49 5,031.63 5,393.41 5,652.56 5,723.17 5,665.42 5,582.76 5,451.06 5,224.35 4,955.82

Accounts payable 312.84 359.56 562.99 668.08 768.88 851.63 922.31 964.96 987.06 1,005.08 1,014.08 1,004.30 984.44

Accrued expenses 197.63 315.09 477.42 572.63 694.46 810.56 925.02 1,019.83 1,099.27 1,179.52 1,254.07 1,308.75 1,351.83

Deferred revenue 443.47 618.62 760.90 912.65 1,061.64 1,194.87 1,314.90 1,405.29 1,476.12 1,551.56 1,615.95 1,652.00 1,688.97

Total Net Operating Working Capital 459.53 783.99 1,307.65 3,867.92 5,828.71 7,703.87 9,637.18 11,492.05 13,261.22 15,113.34 16,962.50 18,587.02 20,053.12

Plus: Net PPEProperty & Equipment, Net 250.40 319.40 418.28 512.60 605.64 695.22 787.96 869.16 939.74 1,028.91 1,116.04 1,187.76 1,250.87

Total Net PPE 250.40 319.40 418.28 512.60 605.64 695.22 787.96 869.16 939.74 1,028.91 1,116.04 1,187.76 1,250.87

Plus: Net Other Operating AssetsCapitalized PV of operating leases 473.63 571.79 1,219.70 1504.43 1777.49 2040.40 2312.58 2550.90 2758.03 3019.77 3275.48 3485.96 3671.19

Capitalized PV of licensed content 9,595.32 11,771.78 14,081.46 14,334.93 14,549.95 14,710.00 14,842.39 14,961.13 15,065.86 15,156.26 15,232.04 15,292.96 15,354.14

Non-current content assets, net 7,274.50 10,371.06 14,960.95 17,743.56 21,946.67 26,076.80 30,262.58 33,874.86 37,035.26 40,298.33 43,430.94 45,907.17 48,006.81

Other non-current assets 341.42 652.31 901.03 1,136.49 1,390.24 1,636.73 1,884.05 2,095.17 2,277.97 2,465.47 2,644.03 2,783.24 2,899.80

Total Net Other Operating Assets 17,684.87 23,366.93 31,163.15 34,719.41 39,664.36 44,463.94 49,301.61 53,482.06 57,137.12 60,939.82 64,582.48 67,469.34 69,931.94

Less: Other Operating LiabilitiesNon-current content liabilities 2,894.65 3,329.80 3,759.03 5,057.16 6,007.91 6,869.21 7,679.22 8,293.49 8,757.13 9,204.65 9,586.68 9,800.50 9,916.54

Other non-current liabilities 61.19 135.25 129.23 158.30 188.06 215.02 240.38 259.61 274.12 288.13 300.09 306.78 310.41

Total Other Operating Liabilities 2,955.84 3,465.04 3,888.26 5,215.47 6,195.97 7,084.23 7,919.60 8,553.09 9,031.25 9,492.78 9,886.77 10,107.28 10,226.95

Invested Capital 15,438.95 21,005.29 29,000.82 33,884.47 39,902.73 45,778.79 51,807.15 57,290.18 62,306.84 67,589.30 72,774.26 77,136.84 81,008.98

ROIC

NOPLAT 220.22 625.34 1,430.00 2,672.20 4,289.15 6,240.60 8,686.54 11,264.91 13,639.37 16,169.91 18,832.96 21,234.76 23,566.03

Divided by:

Beginning Invested Capital 10,311.87 15,438.95 21,005.29 29,000.82 33,884.47 39,902.73 45,778.79 51,807.15 57,290.18 62,306.84 67,589.30 72,774.26 77,136.84

ROIC 2.14% 4.05% 6.81% 9.21% 12.66% 15.64% 18.98% 21.74% 23.81% 25.95% 27.86% 29.18% 30.55%

FCF

NOPLAT 220.22 625.34 1,430.00 2,672.20 4,289.15 6,240.60 8,686.54 11,264.91 13,639.37 16,169.91 18,832.96 21,234.76 23,566.03

Less:

Change in Invested Capital 5,127.08 5,566.33 7,995.54 4,883.65 6,018.26 5,876.06 6,028.36 5,483.03 5,016.66 5,282.46 5,184.96 4,362.58 3,872.14

FCF (4,906.86) (4,940.99) (6,565.53) (2,211.45) (1,729.11) 364.53 2,658.18 5,781.88 8,622.72 10,887.45 13,647.99 16,872.18 19,693.88

EP

Beginning Invested Capital 10,311.87 15,438.95 21,005.29 29,000.82 33,884.47 39,902.73 45,778.79 51,807.15 57,290.18 62,306.84 67,589.30 72,774.26 77,136.84

Multiply by: (ROIC - WACC)

ROIC 2.14% 4.05% 6.81% 9.21% 12.66% 15.64% 18.98% 21.74% 23.81% 25.95% 27.86% 29.18% 30.55%

WACC 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39%

ROIC - WACC -8.25% -6.34% -3.58% -1.18% 2.27% 5.25% 8.59% 11.35% 13.42% 15.56% 17.47% 18.79% 20.16%

EP (851.18) (978.77) (752.45) (340.99) 768.55 2,094.71 3,930.12 5,882.15 7,686.92 9,696.23 11,810.43 13,673.51 15,551.51

NetflixWeighted Average Cost of Capital (WACC) Estimation

Cost of Equity AssumptionBeta 1.68Risk-free Rate (10-Y Treasury) 2.50%Equity Risk Premium 4.95%Cost of Equity 10.816%

Cost of Debt AssumptionPre-Tax Cost of Debt 5.88%Marginal Tax Rate 27.00%After Tax Cost of debt 4.29%

Market Value of EquityPrice per Share $367.65Shares Outstanding (in Million) 435.37MV of Equity (in Million) $160,063.78

Market Value of Debt ( 2018 10K: in Million)Long-term Debt $10,360.06PV of Operating Lease $1,227.61MV of Debt (in Million) $11,587.67

Weights% Equity 93.25%% Debt 6.75%

WACC 10.375%

NetflixDiscounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth 3.75% CV ROIC 30.55% WACC 10.39% Cost of Equity 10.82%

Fiscal Years Ending Dec. 31 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CV

DCF ModelFCF (2,211.45) (1,729.11) 364.53 2,658.18 5,781.88 8,622.72 10,887.45 13,647.99 16,872.18 19,693.88 CV 311,346.32 CF to Discount (2,211.45) (1,729.11) 364.53 2,658.18 5,781.88 8,622.72 10,887.45 13,647.99 16,872.18 311,346.32 Discount Rate 1.10 1.22 1.35 1.48 1.64 1.81 2.00 2.21 2.43 2.43 Present Value of FCF (2,003.31) (1,418.93) 270.99 1,790.05 3,527.12 4,765.03 5,450.27 6,189.15 6,931.12 127,901.65

PV of Operating Assets 153,403.14

+ Excess Cash 1,899.16 - PV operating lease 1,227.61 - Long term Debt 10,360.06 -ESOP 6,108.16 Value of Equity 137,606.47$

Shares Outstanding 435.37

Intrinsic Value of Equity 316.06$ Price Today 324.44$

EP ModelNOPLAT 2,672.20 4,289.15 6,240.60 8,686.54 11,264.91 13,639.37 16,169.91 18,832.96 21,234.76 23,566.03 Beg. IC 29,000.82 33,884.47 39,902.73 45,778.79 51,807.15 57,290.18 62,306.84 67,589.30 72,774.26 77,136.84 ROIC 9.21% 12.66% 15.64% 18.98% 21.74% 23.81% 25.95% 27.86% 29.18% 30.55%WACC 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39% 10.39%EP (340.99) 768.55 2,094.71 3,930.12 5,882.15 7,686.92 9,696.23 11,810.43 13,673.51 15,551.51 CV 234,209.48 Discount Rate 1.10 1.22 1.35 1.48 1.64 1.81 2.00 2.21 2.43 2.43 Present Value of FCF (308.89) 630.69 1,557.16 2,646.59 3,588.29 4,247.90 4,853.94 5,355.84 5,617.11 96,213.69

Beg. IC 29,000.82 PV of Operating Assets 153,403.14

+ Excess Cash 1,899.16 - PV operating lease 1,227.61 - Long term Debt 10,360.06 -ESOP 6,108.16 Value of Equity 137,606.47$

Shares Outstanding 435.37

Intrinsic Value of Equity 316.06$ Price Today 324.44$

Fiscal Years Ending 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CV

EPS 4.97$ 8.23$ 12.24$ 17.39$ 22.90$ 28.00$ 33.44$ 39.19$ 44.43$ 49.55$

Key Assumptions CV growth 3.75% CV ROE 18.09% Cost of Equity 10.83%

Future Cash Flows P/E Multiple (CV Year) 11.20 EPS (CV Year) 49.55$ Future Stock Price 555.06$ Dividends Per Share Estimate -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Future Cash Flows -$ -$ -$ -$ -$ -$ -$ -$ -$ 220.07$

Discounted Cash Flows 220.07$

Intrinsic Value 220.07$ Price Today 225.91$

NetflixRelative Valuation Models

EPS EPS Est. 5yr RevenueTicker Company Price 2019E 2020E P/E 19 P/E 20 EPS gr. PEG 19 PEG 20 2018 5 yr. CAGR EBITDA EBITAMZN Amazon $1,813.98 $27.53 $39.74 65.89 45.65 44.00 1.50 1.04 $232,887 25.38% $33,476 12,421$ DIS Walt Disney Co. $111.96 $7.03 $7.26 15.93 15.42 8.00 1.99 1.93 $15,303 3.48% $4,226 3,655$ FOX Twenty-First Century Fox Inc $35.70 $2.20 $2.58 16.23 13.84 17.00 0.95 0.81 $30,400 1.90% $7,032 6,379$ CBS CBS Corp. $47.94 $5.56 $6.57 8.62 7.30 18.00 0.48 0.41 $14,514 0.13% $3,271 3,048$ VIAB Viacom $28.82 $4.24 $4.44 6.80 6.49 5.00 1.36 1.30 $12,943 -1.40% $3,008 2,795$

Average 22.69 17.74 1.26 1.10 10,202.60 5,659.60

NFLX Netflix $367.65 $4.97 $8.23 73.9 44.7 66.9 1.1 0.7 $15,794 58.79% 9,262 1,605

Implied Relative Value: P/E (EPS19) $ 112.88 P/E (EPS20) 146.04$ PEG (EPS19) 417.82$ PEG (EPS20) 603.60$

Margins

NetflixKey Management Ratios

Fiscal Years Ending 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E

Liquidity RatiosCurrent Ratio 1.25 1.40 1.49 1.82 2.08 2.53 2.95 3.69 4.66 5.87 7.36 9.26 11.58 Quick Ratio 1.25 1.40 1.49 1.82 2.08 2.53 2.95 3.69 4.66 5.87 7.36 9.26 11.58 Cash Ratio 0.32 0.52 0.58 0.61 0.71 1.03 1.33 1.94 2.78 3.85 5.19 6.95 9.11

Activity or Asset-Management RatiosAsset Turnover 0.65 0.61 0.61 0.63 0.63 0.60 0.59 0.55 0.51 0.48 0.44 0.40 0.37 Fixed Asset Turnover 41.67 41.04 42.82 43.30 44.61 45.67 46.64 46.96 47.32 47.61 47.41 47.00 46.80 Content Turnover 0.80 0.80 0.79 0.80 0.80 0.80 0.80 0.81 0.82 0.82 0.83 0.84 0.84

Financial Leverage RatiosDebt Ratio 0.80 0.81 0.80 0.76 0.71 0.65 0.57 0.50 0.43 0.36 0.31 0.26 0.22 Equity Ratio 0.20 0.19 0.20 0.24 0.29 0.35 0.43 0.50 0.57 0.64 0.69 0.74 0.78 Debt to Equity Ratio 4.07 4.31 3.96 3.13 2.39 1.84 1.35 1.00 0.75 0.57 0.45 0.35 0.28

Profitability RatiosGross Profit Margin 31.06% 33.88% 36.37% 38.87% 41.64% 44.39% 47.73% 50.80% 53.01% 54.79% 56.39% 57.68% 58.83%Return on Asset 0.95% 2.56% 4.34% 6.82% 9.18% 11.03% 13.12% 14.45% 14.96% 15.10% 15.04% 14.63% 14.11%Return on Equity 4.82% 13.60% 21.53% 28.20% 31.12% 31.38% 30.84% 28.88% 26.10% 23.77% 21.78% 19.80% 18.09%

Ratio DefinitionsCurrent Ratio Total current assets / Total current liabilitiesQuick Ratio (Total current assets - Inventories) / Total current liabilitiesCash Ratio Cash & cash equivalents / Total current liabilities

Asset Turnover Revenue / Total AssetsFixed Asset Turnover Revenue / Average net PPEContent Turnover Revenue / Total content assetsDebt Ratio Total liabilities / Total assetsEquity Ratio Total equity / total assetsDebt to Equity Ratio Total liabilities / Total equityGross Profit Margin Gross Profit / RevenueReturn on Asset Net Income / Total AssetsReturn on Equity Net Income / Total Equity

Present Value of Operating Lease Obligations (2018) Present Value of Operating Lease Obligations (2017) Present Value of Operating Lease Obligations (2016) Present Value of Operating Lease Obligations (2015)

Operating Operating Operating OperatingFiscal Years Ending Dec. 31 Leases Fiscal Years Ending Dec. 31 Leases Fiscal Years Ending 323.75179746015 Leases Fiscal Years Ending 323.75179746015 Leases2019 172.47 2018 101.987 2017 64.502 2016 42.5452020 139.366 2019 97.56 2018 76.31 2017 54.8112021 145.175 2020 96.255 2019 68.456 2018 58.0152022 156.527 2021 85.188 2020 66.603 2019 53.1522023 151.2 2022 77.418 2021 57.434 2020 51.844Thereafter 943.63 Thereafter 278.97 Thereafter 307.535 Thereafter 269.377Total Minimum Payments 1708.368 Total Minimum Payments 737.378 Total Minimum Payments 640.84 Total Minimum Payments 529.744Less: Interest 481 Less: Interest 163 Less: Interest 164 Less: Interest 140PV of Minimum Payments 1227.61 PV of Minimum Payments 574.63 PV of Minimum Payments 476.40 PV of Minimum Payments 389.50

Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases Capitalization of Operating Leases

Pre-Tax Cost of Debt 5.88% Pre-Tax Cost of Debt 5.88% Pre-Tax Cost of Debt 5.88% Pre-Tax Cost of Debt 5.88%Number Years Implied by Year 6 Payment 6.2 Number Years Implied by Year 6 Payment 3.6 Number Years Implied by Year 6 Payment 5.4 Number Years Implied by Year 6 Payment 5.2

Lease PV Lease Lease PV Lease Lease PV Lease Lease PV LeaseYear Commitment Payment Year Commitment Payment Year Commitment Payment Year Commitment Payment1 172.47 162.9 1 101.987 96.3 1 64.502 60.9 1 42.545 40.22 139.366 124.3 2 97.56 87.0 2 76.31 68.1 2 54.811 48.93 145.175 122.3 3 96.255 81.1 3 68.456 57.7 3 58.015 48.94 156.527 124.6 4 85.188 67.8 4 66.603 53.0 4 53.152 42.35 151.2 113.7 5 77.418 58.2 5 57.434 43.2 5 51.844 39.06 & beyond 151.2 579.8 6 & beyond 77.418 184.2 6 & beyond 57.434 193.5 6 & beyond 51.844 170.3PV of Minimum Payments 1227.6 PV of Minimum Payments 574.6 PV of Minimum Payments 476.4 PV of Minimum Payments 389.5

2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVPV of Operating Leases 389.50 476.40 574.63 1227.61 1504.43 1777.49 2040.40 2312.58 2550.90 2758.03 3019.77 3275.48 3485.96 3671.19Growth Rate 135.82% 22.31% 20.62% 113.64% 22.55% 18.15% 14.79% 13.34% 10.31% 8.12% 9.49% 8.47% 6.43% 5.31%Interest Rate 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88% 5.88%Interest 22.88 27.99 33.76 72.12 88.39 104.43 119.87 135.86 149.87 162.03 177.41 192.43 204.80 215.68

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol NFLXCurrent Stock Price $367.65Risk Free Rate 2.50%Current Dividend Yield 0.00%Annualized St. Dev. of Stock Returns 50.32%

Average Average B-S Value of Range of Number Exercise Remaining Option Options GrantedOutstanding Options of Shares Price Life (yrs) Price (in Millions)Range 1 20,479,278 89.61 5.71 298.26$ 6,108$ Total 20,479,278 89.61$ 5.71 298.26$ 6,108$

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 20,479,278Average Time to Maturity (years): 5.71Expected Annual Number of Options Exercised: 3,586,564

Current Average Strike Price: 89.61$ Cost of Equity: 10.83%Current Stock Price: $367.65

2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028CVIncrease in Shares Outstanding: 3,586,564 3,586,564 2,080,207 0 0 0 0 0Average Strike Price: 89.61$ 89.61$ 89.61$ 89.61$ 89.61$ 89.61$ 89.61$ 89.61$ 89.61$ 89.61$ Increase in Common Stock Account: 321,391,962 321,391,962 186,407,338 - - - - - - -

Change in Treasury Stock 0 0 0 0 0 0 0 0 0 0Expected Price of Repurchased Shares: 367.65$ 407.45$ 451.56$ 500.45$ 554.63$ 614.67$ 681.22$ 754.96$ 836.70$ 927.28$ Number of Shares Repurchased: - - - - - - - - - -

Shares Outstanding (beginning of the year) 435,374,000 438,960,564 442,547,127 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334Plus: Shares Issued Through ESOP 3,586,564 3,586,564 2,080,207 0 0 0 0 0 0 0Less: Shares Repurchased in Treasury - - - - - - - - - - Shares Outstanding (end of the year) 438,960,564 442,547,127 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334 444,627,334

324.44$ 1.48 1.53 1.58 1.63 1.68 1.73 1.78 1.83 1.88 324.44$ 19% 21% 23% 25% 27% 29% 31% 33% 35%4.79% 323.53 323.71 323.89 324.06 324.24 324.42 324.60 324.78 324.96 2.34% 327.17 326.46 325.76 325.05 324.35 323.65 322.94 322.24 321.544.83% 323.57 323.75 323.93 324.11 324.29 324.47 324.65 324.83 325.01 2.38% 327.19 326.49 325.78 325.08 324.37 323.67 322.97 322.26 321.564.87% 323.61 323.80 323.98 324.16 324.34 324.53 324.71 324.89 325.07 2.42% 327.21 326.51 325.81 325.10 324.40 323.69 322.99 322.29 321.584.91% 323.66 323.84 324.03 324.21 324.39 324.58 324.76 324.94 325.13 2.46% 327.24 326.53 325.83 325.13 324.42 323.72 323.01 322.31 321.614.95% 323.70 323.89 324.07 324.26 324.44 324.63 324.81 325.00 325.18 2.50% 327.26 326.56 325.85 325.15 324.44 323.74 323.04 322.33 321.634.99% 323.75 323.94 324.12 324.31 324.49 324.68 324.87 325.05 325.24 2.54% 327.28 326.58 325.88 325.17 324.47 323.76 323.06 322.36 321.655.03% 323.79 323.98 324.17 324.36 324.55 324.73 324.92 325.11 325.29 2.58% 327.31 326.60 325.90 325.20 324.49 323.79 323.08 322.38 321.685.07% 323.84 324.03 324.22 324.41 324.60 324.78 324.97 325.16 325.35 2.62% 327.33 326.63 325.92 325.22 324.51 323.81 323.11 322.40 321.705.11% 323.88 324.07 324.26 324.45 324.65 324.84 325.03 325.21 325.40 2.66% 327.35 326.65 325.95 325.24 324.54 323.83 323.13 322.43 321.72

324.44$ 3.15% 3.30% 3.45% 3.60% 3.75% 3.90% 4.05% 4.20% 4.35% 324.44$ 3.15% 3.30% 3.45% 3.60% 3.75% 3.90% 4.05% 4.20% 4.35%9.59% 365.79 371.98 378.48 385.30 392.47 400.01 407.97 416.37 425.25 -2.2% 314.66 319.20 323.93 328.88 334.05 339.45 345.11 351.05 357.289.79% 349.31 354.98 360.92 367.15 373.68 380.55 387.78 395.40 403.43 -1.2% 312.64 317.15 321.85 326.76 331.89 337.26 342.89 348.79 354.989.99% 333.85 339.05 344.50 350.19 356.16 362.43 369.01 375.93 383.22 -0.2% 310.47 314.94 319.61 324.49 329.58 334.92 340.50 346.35 352.50

10.19% 319.32 324.10 329.10 334.32 339.78 345.51 351.52 357.82 364.45 0.8% 308.14 312.58 317.21 322.05 327.10 332.39 337.93 343.74 349.8410.39% 305.65 310.05 314.64 319.43 324.44 329.69 335.18 340.94 346.98 1.8% 305.65 310.05 314.64 319.43 324.44 329.69 335.18 340.94 346.9810.59% 292.75 296.81 301.04 305.45 310.05 314.86 319.89 325.16 330.68 2.8% 302.97 307.33 311.88 316.63 321.59 326.79 332.22 337.93 343.9110.79% 280.58 284.33 288.23 292.29 296.52 300.94 305.56 310.39 315.44 3.8% 300.10 304.42 308.92 313.62 318.53 323.67 329.05 334.70 340.6210.99% 269.07 272.54 276.14 279.89 283.79 287.86 292.10 296.53 301.16 4.8% 297.03 301.30 305.75 310.40 315.25 320.33 325.66 331.24 337.0911.19% 258.18 261.39 264.72 268.18 271.78 275.53 279.44 283.51 287.76 5.8% 293.74 297.96 302.35 306.94 311.74 316.76 322.01 327.53 333.31

324.44$ -5.35% -4.55% -3.75% -2.95% -2.15% -1.35% -0.55% 0.25% 1.05%5.48% 294.04 301.54 309.05 316.55 324.06 331.56 339.07 346.57 354.085.58% 294.14 301.64 309.15 316.65 324.16 331.66 339.17 346.67 354.185.68% 294.24 301.74 309.25 316.75 324.26 331.76 339.27 346.77 354.285.78% 294.33 301.84 309.34 316.85 324.35 331.86 339.36 346.87 354.375.88% 294.43 301.93 309.44 316.94 324.45 331.95 339.46 346.96 354.475.98% 294.53 302.03 309.54 317.04 324.55 332.05 339.56 347.06 354.576.08% 294.62 302.13 309.63 317.14 324.64 332.15 339.65 347.16 354.666.18% 294.71 302.22 309.72 317.23 324.73 332.24 339.74 347.25 354.756.28% 294.81 302.31 309.82 317.32 324.83 332.33 339.84 347.34 354.85

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