Netflix Inc.

The stable outlook reflects our expectation that Netflix will continue to benefit from solid operating performance as it expands globally with revenue growth around 30% in 2019 and about 25% in 2020 and benefit from operating leverage expanding margins by close to 300 bps per year. We expect the company to debt finance its free cash flow deficits resulting from significant content investments in original programming. We could lower the rating if revenue growth meaningfully decreases to well below 20%, EBITDA margin expansion slows, and free cash flow deficits substantially increase. This would likely occur if increased competition from new and existing over-the-top (OTT) platforms dampens subscriber growth or if content and marketing investments are less effective at retaining subscribers.

...Netflix is the largest global SVOD service provider with a large and growing subscriber base.Netflix is the leading global SVOD service provider with 139 million paying subscribers (58% international and 42% domestic). Among its SVOD competitors, only Amazon Prime has a global platform, whereas most other providers only operate domestically. Netflix's global platform allows it to spread its content investments across its large and growing subscriber base effectively reducing cost per subscriber for each individual content investment it makes. Netflix is taking advantage of its global reach to capture the growing SVOD share across the globe. The company's subscriber base continues to show strong growth (25% CAGR over the past three years), supported by subscriber growth in international markets where penetration rates are low. We believe Netflix should continue to benefit from this dynamic over the next few years even as SVOD competition increases in the U.S. with several new launches coming...

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