Netflix’s finances booming, and the balance sheet looks great

The BLAKE & WANG P.A Entertainment Lawyer team looked just last week at some exciting developments in the Netflix stock price after a long-anticipated and very exciting financial statement release. The positive news was well received by the market, seeing a boom in stock price that is still anticipated to grow with time. As we mentioned in that article, Netflix looks set to be free of debt financing as close as 2022. As can be expected in the wake of this positive news, we’ve seen strong financial indicators throughout the week for the streaming service, culminating in a ratings upgrade from S&P.

S&P analysts keep the credit outlook ‘positive’ and upgrade ratings

The great financial release saw S&P Global Ratings announce a debt rating upgrade for Netflix. As can be expected, their spectacular free cash flow improvement was cited as a reason, in addition to the continuing streaming boom. This moves them from BB to a BB+.

As a reminder, Netflix has stated on record that it could break even on free cash flow as early as this year, and they anticipate staying cash flow positive going ahead. The S&P rating indicates they expect the company to at least break even on free operating cash flow through the year. Of course, Netflix isn’t the only streaming channel to see unanticipated growth in 2020 through the global health crisis, but it has been highlighted that, as the ‘household name’ in streaming, the boom has been particularly profitable for Netflix, and this seems to be the underpinning thought to the ratings upgrade.

Positive outlook despite aggressive intended spending

This comes even as Netflix has launched an ambitious and content-heavy program for 2021 that will undoubtedly be costly, and that fact was also acknowledged by the S&P team. They are still happy to predict that the company will remain out of the red due to its enhanced reach and the pulling power of the brand.

Where does this leave the streaming channel? It’s certainly a great place to be, financially, with everything from rating agencies to the stock market looking at you as a 2020 success story. S&P emphasized that good financial policy and solid discipline could see another upgrade down the line, provided they manage to keep content costs under control and their cash flow looking good long term. This goodwill isn’t without limits, however. Should Netflix opt to increase content spending past their currently anticipated point, start feeling pressure from their competition, or seek to spend on accelerated subscriber growth, there is still a chance the S&P rating could reverse later in the year.

All the same, this is an impressive step forward for the streaming channel, and with some predicted Oscar wins in the possible future too, we can expect to see big things from Netflix this year. BLAKE & WANG P.A will keep you in the loop on the streaming channel’s growth as the year progresses.