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Netflix's Cash Burn Is Getting Worse

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Netflix's Cash Burn Is Getting Worse
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Netflix, Inc. (NASDAQ: NFLX) reported Q4 adjusted EPS of $0.07 versus consensus expectations of $0.02. However, with the stock currently sporting a P/E ratio of 273.8, it’s clear that profits are of no importance to the market, at least in the short-term.

Instead, many Netflix bulls look to subscriber growth to justify the stock’s loft valuation and long-term earnings potential. In Q4, Netflix reported domestic adds of 1.56 million, slightly below expectations of 1.62 million.

International subscriptions, however, came in at 4 million, well ahead of consensus expectations of 3.5 million. Unfortunately for Netflix shareholders, these new international customers are expensive.

Related Link: Netflix Investors: Subscribers Growth Is Overrated, Pay Attention To Price Elasticity Instead!

Netflix also confirmed that international expansion efforts produced record-high cash burn of $276 million in Q4, continuing the trend from previous quarters.

In addition, the company indicated in its report that shareholders can expect more of the same in coming quarters.

“As a reminder, our investment in originals, particularly owned content, requires more cash upfront relative to licensed content, which will continue to dampen free cash flow… Given our expected cash needs, we are likely to raise additional debt in late 2016 or early 2017,” the company explained.

After finishing 2015 as the top-performing stock in the S&P 500, Netflix shares are now down 11.2 percent in 2016.

Disclosure: the author holds no position in the stocks mentioned.

Posted-In: Earnings News Tech Best of Benzinga

 

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