Netflix gains $34 billion in market value after saying it will end its borrowing binge and explore stock buybacks

queen's gambit
  • Netflix stock surged as much as 15% on Wednesday after fourth-quarter earnings beat forecasts.
  • The video-streaming service added a record 37 million paid subscribers in 2020.
  • Netflix expects to generate enough cash to end its borrowing spree and potentially fund share buybacks.

Netflix shares jumped as much as 15% on Wednesday, after the entertainment titan trumpeted its cash generation and teased stock buybacks in fourth-quarter earnings that surpassed Wall Street’s expectations. The rally added up to $34 billion to its market capitalization.

The video-streaming service – the world’s largest – added a record 37 million paid subscribers in 2020, boosting its global members by 22% to more than 200 million for the first time. Its annual revenue surged 24% to $25 billion as a result, driving its operating income up 76% to $4.6 billion.

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Netflix also reduced its free cash outflow from $1.7 billion in the fourth quarter of 2019 to $300 million last quarter, and expects it will shrink to around zero this year.

The group’s bosses expect the stronger cash generation will allow them to finance everyday operations without tapping debt markets anymore. They will also explore returning cash to shareholders via stock buybacks.

Netflix counts chess drama “The Queen’s Gambit,” period drama “Bridgerton,” and season four of “The Crown” among its recent hits. It has borrowed more than $16 billion over the last decade to build its library of TV shows and movies, The New York Times said.

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The streaming company has been one of the few beneficiaries of the COVID-19 pandemic. Signups surged last year as lockdowns and travel restrictions forced millions of people to spend more time at home, and government closures of gyms, stores, and restaurants severely limited their leisure options.

Here’s a chart showing Netflix’s stellar stock performance over the past year:

Netflixstockchart_200121

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