Netflix Inc. had a couple of surprises. in its most recent fourth quarter, including one that took away long clouds for investors.
After surpassing Wall Street estimates for new subscriptions and posting one of the biggest quarters ever, the streaming giant told investors in its shareholder letter Tuesday that it is very close has been positive about cash flow.
“For the full year 2021, we currently expect free cash flow to be around balance (vs. our previous expectation for – $ 1 billion to balance),” Netflix NFLX ,
said in his letter. And then came the great news: “With our $ 8.2 billion cash balance and our $ 750 million credit facility, we believe we don’t need to raise more external funding for our work. everyday. ”
Netflix debt has long been a concern for shareholders. The main driver is its high cost to develop or license original content. In the fourth quarter, the company said its current debt for content was $ 4.429 billion, up slightly from $ 4.413 billion in the fourth year ago, while its unrelated liabilities came in at $ 2.6 billion in this quarter.
Read more about it Netflix content goals.
News that Netflix no longer has to look for external funding for its activity, along with hitting a record of more than 200 million total subscribers in the quarter, led to a 12% jump in its shares in after-hours trading. Another big driver was the statement that Netflix is also considering buying stock.
“We have turned this corner where we can now, as we said, with $ 8 billion of cash on balance, designed to be a cash flow about cash balance in 2021 and then positive after that, ”said Spencer Neumann, Chief Financial Officer of Netflix. in a company-recorded interview. “We want to return too much money to our shareholders, so we don’t raise a handful of extra money. ”
Investors have long felt the need for the streaming giant to spend subtly to develop original content, but as new competitors jumped into the industry, they look at the suspicion of the debt issue, as Netflix ‘s early business model changed to an outflow.
Now that Netflix is finally ready to fund spending needs with money from its operations, investors can move on to start worrying again about future subscriber growth . With more buyers than ever before at home as the pandemic continues, it can be harder and harder to find new registrants.
When asked Tuesday by Barclays Capital analyst Kannan Venkateshwar to give some insight into his estimates of subscriber growth going forward, Neumann was unusual. “Just like we’ve talked about, there’s so much uncertainty in the industry, we can give a number but I’m not sure if it was worth it or banking,” said Neumann. “It’s hard enough to start the next 90 days, let alone the next 12 months. But we feel very good about what I said was that long-term growth path. ”
But with the highest number of registrants, some investors will no doubt be questioning whether growth is on the rise, coupled with the pandemic. If and when ordering a stay at home is easy in the coming months, the big question remains: Will consumers watch fewer movies and streaming shows? And even if they don’t, Netflix is still increasingly competing from competing services.
So while the biggest old issue for Netflix may be off the table, investors still have something else to worry about.