Netflix (NASDAQ:NFLX) stock is soaring after announcing a blockbuster quarter.
The streaming giant ended its biggest year in company history by announcing that it no longer needs to borrow money to produce TV shows and movies. That news was cheered by investors and analysts who sent Netflix stock up 13% in pre-market trading.
The world’s leading paid streaming service attracted 8.51 million new customers in the final three months of 2020, helped by the popularity of hit shows such as “Bridgerton” and “The Queen’s Gambit.” That outpaced the 6.06 million new subscribers projected by Wall Street analysts.
The earnings report included two key milestones for Netflix: The company passed the 200-million-subscriber mark for the very first time and said its cash flow will allow it to stop relying on debt to fuel its growth.
With $8.2 billion U.S. in cash — and a credit line that hasn’t been drawn down — Netflix said it no longer needs external financing. The company also said that it is considering stock buybacks, something it hasn’t done in about a decade.
The pandemic has provided a huge boost to Netflix’s business, forcing people inside and limiting other entertainment options such as movie theaters. The company added 25.9 million customers in the first six months of 2020 and ended the year with 36.6 million new customers — a record.
While Netflix has consistently reported profits, it had to borrow billions of dollars to fund its spending on new programming. It had negative free cash flow of $3.3 billion U.S. in 2019, its worst on record. But since then, it’s turned a corner. Free cash flow will be close to the break-even point in 2021, Netflix said.
Netflix gave a conservative estimate for the current first quarter of 2021, when it expects to add six million new subscribers. That compares with an average analyst estimate of 7.45 million new customers.