Question

You would like to use Multiples analysis to get an estimate for the Enterprise Value of Disney's new streaming video service, Disney Plus. All you know about Disney Plus is that it has 10 million subscribers.

A firm similar to Disney Plus is Netflix. Netflix has 158 million subscribers. Its stock price is $310, debt is $13.54 billion, cash is $4.44 billion, and shares outstanding is 438 million. Using this information, what is your best estimate for the EV of Disney Plus in millions?

Answer 1

Enterprise Value(EV) is the value of a company's total value. It includes market cap, short term and long term debt.

Enterprise Value = Market Cap + Total Debt - Cash

The market cap of Netflix = Price per share * No. of shares

= 310 * 438 million = 135.780 billion

EV of Netflix = 135,780,000,000 + 13,540,000,000 - 4,440,000,000

= $144,920,000,000 or 144.92 billion

EV/Subscribers of Netflix = 144,920 million / 158 million

= 917.21 times

We can estimate the EV of Disney by comparing Netflix's EV/Subscribers ratio.

EV/Subscribers of Disney = EV/10 million

917.21 * 10 = EV of disney

Estimated EV of Disney = $9,172,151,898 or 9,172.15 million