LOS ANGELES (CelebrityAccess) Netflix announced it is planning on offering $2 billion in bonds to fund new content but analysts are anything but excited.
Although Netflix stock has jumped 60 percent in 2018, is moving its headquarters into new, bigger digs in Los Angeles, and a surprisingly positive recent earnings report, investor gurus remain skeptical of the recent offer. The company’s annual spending on content has risen past $12 billion, according to Deadline Hollywood, and it has put almost 700 hours of original programming on its platform in the third quarter, a 50 percent increase from the last quarter.
“Netflix Is Addicted To Debt And Investors Should Be Terrified,” Yahoo Finance posted in a headline of a story published about an hour ago. The Verge was equally unkind, publishing an article titled “Why The Golden Age Of Streaming Could Be Coming To An End.” Meanwhile, Moody’s gave Netflix’s long-term credit a junk rating of Ba3.
“Netflix is approaching a point where the growth in operating profit is going to grow faster than our growth in content cash spend, and that’s really going to drive the free cash flow towards improvement – it will eventually break even,” said Netflix chief financial officer David Wells on the third-quarter earnings call with analysts, according to Yahoo.
“My competitors have Netflix turning cash flow positive in two years, that’s just crazy – it’s not going to happen,” Wedbush technology analyst Michael Pachter said on Yahoo Finance’s Midday Movers show last week.
The bonds come as Disney plans to compete with Netflix next year with a format backed by content from Marvel, Lucasfilm and Pixar, The Verge noted. AT&T is alspo expected to launch its own Time-Warner focused equivalent around the same time, while Amazon and Comcast are already streaming content.
“That fight will have real implications for consumers as studios pull back licensed content and silo it into paid subscriptions,” wrote The Verge’s Russell Brandom. “Right now, a single Netflix subscription will get you Marvel movies and DC shows alongside in-house originals — but soon, both of those may leave for parent-company subscriptions at Disney and Time Warner respectively. It’s a kind of streaming Cold War, as each company tries to leverage its own franchises into a standalone subscription bundle.”
NFLX stock has danced around the $330 per share mark in morning trading.