CORPORATESISSUER COMMENT 29 JUNE 2015NETFLIX, INC. (NFLX)Moodys Senior Unsecured Rating B1Moodys Outlook STABond-Implied Rating Ba1CDS-Implied Rating Caa1EDF-Implied Rating Ba3As of 6/24/2015ANALYST CONTACTSAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Market Signals ReviewNetflix, Inc.: All Market-Implied Ratings Rise The bond-, EDF'-, and CDS-implied ratings for Netflix each moved higher recently.A year ago the bond-implied rating for Netflix was Ba2. It fell to Ba3 for two days in February 2015, but has now advanced to Ba1 (Figure 1). The companys EDF-implied rating was B2 on June 25, 2014. It has risen by two notches to Ba3, its best level since February 2012.The CDS-implied rating for Netflix is presently Caa1, a slight improvement from the recent low point of Caa2. However, due to illiquidity in the companys CDS contracts, we do not publish a CDS-implied rating every day and accordingly do not view this market signal as a very reliable indicator of creditworthiness.FIGURE 1. NETFLIX: MOODYS AND MARKET-IMPLIED RATINGS, LAST 365 DAYS (DAILY DATA)MOODY'S ANALYTICS CORPORATES2 29 JUNE 2015 MARKET SIGNALS REVIEW : NETFLIX, INC.: ALL MARKET-IMPLIED RATINGS RISEAccording to our ratings gap-conditioned transition matrices, companies rated B1 with a bond-implied rating of Ba1 outperformed the broad market 18% of the time over the following 12 months, matched the markets performance 23% of the time, and underperformed the broad market 52% of the time.The market-implied ratings gaps for Netflix reflect Moodys rating downgrade on January 22, 2015. The bond-implied ratings gap strengthened from +1 notch 12 months ago to +3 notches. The EDF-implied ratings gap advanced from -2 notches a year ago to +1 notch now (Figure 2). The CDS-implied...
