Research Update: Netflix Inc. Upgraded To 'A' From 'BBB+' On Performance, Revised Financial Policy; Outlook Stable

U.S.-based Netflix Inc. has outperformed our forecast over the past several quarters and is generating mid-teens percent revenue growth and material margin expansion that has reduced leverage to 1.1x from 1.6x at the end of 2022. Netflix updated its financial policy after announcing its first-quarter results, supporting our view that S&P Global Ratings-adjusted leverage will remain below 2x on a sustained basis. As a result, we raised our ratings on Netflix, including the issuer credit rating to 'A' from 'BBB+'. The stable outlook reflects our expectation that Netflix will maintain its global leadership position in streaming video and generate 10%-15% revenue growth over the next two years due to its higher subscriber base and increased user monetization from price increases

...- U.S.-based Netflix Inc. has outperformed our forecast over the past several quarters and is generating mid-teens percent revenue growth and material margin expansion that has reduced leverage to 1.1x from 1.6x at the end of 2022. - Netflix updated its financial policy after announcing its first-quarter results, supporting our view that S&P Global Ratings-adjusted leverage will remain below 2x on a sustained basis. - As a result, we raised our ratings on Netflix, including the issuer credit rating to 'A' from '###+'. - The stable outlook reflects our expectation that Netflix will maintain its global leadership position in streaming video and generate 10%-15% revenue growth over the next two years due to its higher subscriber base and increased user monetization from price increases and advertising leading to modest margin expansion. We expect leverage to remain about 1x absent meaningful acquisitions....

Research Update