Netflix is a global subscription-based media company offering TV series, documentaries and feature films across a wide variety of genres and languages with production hubs spread across the globe from Los Angeles to Barcelona to Jakarta. The group has focused on producing its own content with successes from English language productions like ‘The Crown’ to non-English hits such as ‘Nowhere’ and ‘Squid Game’ but it also licenses content from other studios. The group is the leading streaming provider with – as at end-3Q23 – 247mn subscribers globally.
NFLX benefits from an improving credit outlook as the company delivers consistently strong earnings and free cash flow (FCF) within a low leverage environment.
FCF are expected to continue to grow thanks to price hikes, with a USD/GBP/EUR 1–3 increase in the basic and premium ad-free plans across the US, UK, and France. This should help drive average revenue per member (ARM), which was virtually flat y/y at USD 11.7. The end of the Hollywood actors strike – with a deal reached between studios and union SAG-AFTRA – is positive and, following an earlier agreement with the Writers Guild of America, means production can resume.
Moody’s recently upgraded the rating by one notch to Baa2, a move the market flagged as warranted and arguably overdue.
Netflix is a core name for fixed-income investors and its bonds offer a valuable risk-reward opportunity. The company has flagged new issuance would only be for refinancing, which should support its bonds.