Why Netflix Won't Announce A 'Massively Diluted' Stock Split Today? Pacific Crest Securities' Analyst Explains

As Netflix, Inc. NFLX prepares itself for its annual shareholders’ meeting on Wednesday, the main topic of discussion among analysts and investors is whether the company will go for a stock split or not and if yes, then what will be the ratio?

Andy Hargreaves from Pacific Crest Securities was on CNBC recently to share his views on this.

Trust The Board To Do What’s Right For Shareholders

“Well they said they hope to split it, it doesn’t mean that they are going to do a 80 for 1 split though,” Hargreaves said. “And yeah, I think, they are trying to get approval for a big number so that you don’t have to do this again and I trust their management.”

“I trust their board to do what’s right for shareholders. So, I wouldn’t expect them to come out and do some massively diluted acquisition just because they have got approval for more shares.”

Better Than Anybody Else In The World

Hargreaves was asked if there is any chance of a possible hiccup in the future with way that Netflix’s content cost are rising at twice the rate of its revenue. He replied, “Well there is always a chance, right? I mean, the model is highly reliant on subscriber growth. But what we have seen historically is that these guys are better than anybody else in the world probably at using content spend to drive subscriber growth.”

“So, the incremental margins have been fantastic and I don’t see that changing anytime soon unless you see some sort of massive change in competition which is pretty unlikely,” Hargreaves concluded.