Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

Netflix Keeps Burning Cash

International subscribers boosted growth, but we still think the firm will have to spend heavily over time to fend off competition

Morningstar Equity Analysts 18 October, 2018 | 2:07PM

 

Neil Macker: Netflix posted stronger than expected subscriber guidance in the third quarter as the company beat its own weak guidance by roughly 2 million subscribers. The company now has over 130 million subscribers globally, as it continues to expand its global subscriber base. Growth is still being driven internationally, as the company now has almost over 80 million subscribers outside of the US. 

Despite the subscriber gain, Netflix continues to burn cash, as the loss reached almost $860 million in the quarter. The company continues to expect a $3 billion loss for the full year and expects that level to continue in 2019. While the company expects an inflection point in 2020, we do note that increasing competition from not only Disney but possibly launches by Warner Media, Apple, and Walmart should increase the amount of competition. This increased competition may force the company to continue spending on original content. 

We are retaining our narrow moat for Netflix along with our $120 fair value estimate, as we expect the company to face increasing competition over the next five years, which should necessitate ongoing cash burn and limit international margin expansion.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Netflix Inc270.67 USD-5.56

About Author

Morningstar Equity Analysts  Morningstar stock and fund analysts cover 2,000 mutual funds, 2,100 equities, and 300 exchange-traded funds.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites