On Tuesday, corporate bond research firm Gimme Credit reiterated its Outperform recommendation on Netflix (NASDAQ: NFLX) bonds, specifically highlighting the 2030 notes. The firm believes that the streaming giant’s strategic focus on original content, supplemented by licensed material, is driving revenue growth and subscriber engagement. Netflix’s investment in content, amounting to $17 billion annually, has produced impressive results. The streaming giant has consistently topped the charts, with its offerings ranking as the #1 film in streaming for eight of the first eleven weeks of the year, and the #1 original series for nine of the same eleven weeks. This success is attributed to a mix of global and domestic content that resonates with a wide audience.
Gimme Credit also notes that Netflix’s revenue growth is projected to exceed 14% for the current year, a significant increase from the 6% to 7% growth experienced in the previous two years. The firm believes Netflix’s initiative to crack down on password sharing will contribute positively to the revenue stream, supporting the optimistic forecast.
In terms of financial performance, Netflix is outperforming its competitors with a substantial lead in subscribers, earnings, and free cash flow. The company has reversed its negative free cash flow from 2021, reaching an approximate $6 billion. This financial turnaround is accompanied by a rapid decrease in leverage and the accumulation of more than $7 billion in cash reserves.
Gimme Credit’s reiteration of the Outperform rating for Netflix’s 2030 notes reflects the firm’s confidence in the company’s financial health and its strategic direction. The performance of these notes against the 5-year Treasury serves as an indicator of the market’s positive reception to Netflix’s robust content strategy and improved financial metrics.
