The Netflix Free Cash Flow Debate Is Over. Here's Why the Bulls Won
For years, Netflix (NASDAQ: NFLX) has burned billions in cash to fund its giant appetite for new content. And for just as long, bears have pointed to that business model as fundamentally flawed, arguing that the strategy would one day lead to the company's unraveling. Below are some quotes from Netflix bears.
Indeed, Netflix has burned billions in cash on its warpath through the entertainment industry. The company now has more than $14 billion in debt, and finished 2019 with -$3.3 billion in free cash flow, which management believed would be the peak in its cash burn. Prior to the pandemic, it had expected to burn $2.5 billion this year, though it now believes free cash flow will be -$1 billion or better in 2020 due to delays in production.
COVID-19 and the resulting stay-at-home orders have been an unquestionable tailwind for Netflix, resulting in record subscriber additions of 15.8 million in the first quarter. At the same time, the crisis has kneecapped competitors like Disney, traditional media companies, and the movie studio/theater ecosystem. Based on the effect of the pandemic, Netflix's own impressive growth, and other recent events, the debate over the streamer's cash burn has essentially become irrelevant. Here's why.
Source Fool.com
