February 23, 2012

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Bad Movie
Netflix Faces Increased Competition, Share Price in Jeopardy? Netflix Inc. is the largest online movie rental subscription service in the United States providing subscribers access to a comprehensive library of more than 18,000 movie, television and other filmed entertainment titles. Netflix a short pick from our Diversified Growth Strategy, is down more than 7% since the most recent re-balance of our ValuEngine Forecast 16 Market Neutral Newsletter. Netflix was pretty parabolic to the upside just a few months ago but some bad management decisions and a subscriber revolt really took the luster off the company. The ensuing damage control seemed to have worked with an increase in subscribers, but now competition is starting to develop. Earlier this week, Comcast announced a similar on demand service which will be priced less than Netflix's $8/month. The giant cable provider thus joins Amazon.com in fighting for the Netflix client base. ValuEngine has issued a SELL recommendation for NETFLIX INC on Feb. 23, 2012. Based on the information we have gathered and our resulting research, we feel that NETFLIX INC has the probability to UNDERPERFORM average market performance for the next year. The company exhibits UNATTRACTIVE expected EPS growth, market valuation and market/book ratio.

Based on available data as of Feb. 23, 2012, we believe that NFLX should be trading at $28.1. This makes NFLX 300.00% overvalued. Fair Value indicates what we believe the stock should be trading at today if the stock market were perfectly efficient and everything traded at its true worth. For NFLX, we base this on actual earnings per share (EPS) for the previous four quarters of $3.80, forecasted EPS for the next four quarters of $0.00, and correlations to the 30- year Treasury bond yield of 3.15%.
ValuEngine Forecast Target Price*
1-Month 3-Month 6-Month 1-Year 2-Year 3-Year 109.27 108.31 105.13 99.72 84.56 81.82

Expected Return
-2.79% -3.64% -6.47% -11.28% -24.77% -27.20%

Valuation & Rankings

Valuation 1-M Forecast Return 12-M Return Sharpe Ratio 5-Y Avg Annual Return Volatility Expected EPS Growth Market Cap (billions) Trailing P/E Ratio Forward P/E Ratio PEG Ratio Price/Sales Market/Book Beta Alpha 300.00% overvalued -2.79% -49.28% 0.52 32.14% 62.18% -99.99% 6.22 29.57 232051 n/a 1.94 9.6 0.63 -0.51 Valuation Rank 1-M Forecast Return Rank Momentum Rank Sharpe Ratio Rank 5-Y Avg Annual Rtn Rank Volatility Rank EPS Growth Rank Size Rank Trailing P/E Rank Forward P/E Ratio Rank PEG Ratio Rank Price/Sales Rank Market/Book Rank Beta Rank Alpha Rank 3 6 15 95 99 37 2 90 34 1 n/a 38 10 77 16

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Market Overview
Summary of VE Stock Universe
Stocks Undervalued Stocks Overvalued Stocks Undervalued by 20% Stocks Overvalued by 20% 55.50% 44.50% 22.11% 16.89%

Sector
Aerospace Auto-Tires-Trucks Basic Materials Business Services Computer and Technology Construction Consumer Discretionary Consumer Staples Finance Industrial Products Medical Multi-Sector Conglomerates Oils-Energy Retail-Wholesale Transportation Utilities

Change
-0.28% -0.73% -0.02% -0.32% -0.64% -1.09% -0.26% -0.25% -0.74% 0.24% -0.11% -0.77% -0.22% -0.59% -0.30% -0.24%

MTD
0.30% 4.55% 1.24% 1.16% 3.48% 3.25% 3.40% 2.63% 2.41% 2.71% 1.88% 1.83% 5.85% 3.18% 4.63% 1.52%

YTD
6.54% 18.96% 13.20% 9.10% 14.16% 14.83% 11.98% 7.18% 10.00% 13.32% 9.85% 11.96% 10.66% 10.22% 13.37% 3.06%

Valuation
11.92% overvalued 3.89% overvalued 7.87% overvalued 5.69% overvalued 19.04% overvalued 2.80% undervalued 3.59% overvalued 11.02% overvalued 18.47% overvalued 12.07% overvalued 15.91% overvalued 16.96% overvalued 10.70% overvalued 17.90% overvalued 8.84% overvalued 12.16% overvalued

Last 12P/E MReturn Ratio

-6.01% -8.54% -21.03% -2.71% -11.76% -12.49% -4.76% -4.99% -3.55% -9.38% -8.73% -3.19% -17.68% 5.03% -14.69% 0.85% 28.8 31.91 22.45 24.73 42.65 30.5 27.77 23.02 22.15 26.65 39.62 16.05 41.05 21.6 21.52 24.76