Netflix
- Netflix announced Monday it will sell $1.5 billion of debt notes to finance new content.
- The company's constantly increasing cash burn has some analysts worried.
- Follow Netflix's stock price in real-time here.
Netflix will raise a fresh debt round of $1.5 billion to fund new content, the company announced Monday, adding to its $6.54 billion in long-term debt reported on last week's earnings call.
While the announcement had little impact on Netflix shares - many analysts had already factored in a debt round this year - it has some worried about a rising cash burn and debt load that only continues to grow.
"Investors are oblivious to the fact that Netflix burns cash at an alarming rate," Michael Pachter, an analyst for Wedbush securities and one of Wall Street's biggest Netflix bears, told Business Insider last week ahead of the company's earnings report. "We expect Netflix to burn cash to fund content acquisition for many years, notwithstanding the fact that it has increased price three times while cash burn continues to grow." He has an extremely bearish, $110 price target for Netflix.
Still, Netflix remains committed to investing heavily in new content in order to stave off competition. In its most recent letter to shareholders, dated April 16, the company said "Our debt levels are quite modest as a percentage of our enterprise value, and we believe the debt is lower cost of capital compared to equity." Netflix plans to spend $8 billion on up to 700 new original shows in 2018 it's CFO said in March.
It's competitors, on the other hand, have taken markedly different approaches to the intense competition among streaming providers.
"In a crowded marketplace, it matters how you put things out into the world," Casey Bloys, HBO's head of original programming, told the Hollywood Reporter last week in a thinly veiled jab at Netflix. "We don't put a new show out every week. We take our time, and we try to make every show feel like an event - something special because they are special to us."
Elsewhere, Hulu has branched into live TV offerings in addition to its streamable library, most recently with the addition of ESPN+.
Wall Street remains mixed on Netflix following last week's earnings report, with an average price target of $324, about 1.6% below where the stock was trading. Last week, Credit Suisse said Netflix's latest earnings report brings it closer to "escape velocity" as it distances itself from the competition.
Shares of the company have gained 63.8% so far in 2018, easily outpacing the so-called FAANG basket.
