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Netflix could stop burning cash in the near future, according to Goldman Sachs analyst Heath Terry.
He says Netflix’s big content spend is set to pay off, especially in international markets.
Terry lifted his price target to $490 a share, roughly 30% above Netflix’s current level.
Watch Netflix trade in real time here.

Netflix’s light at the end of the tunnel may finally be emerging.

While Netflix has turned in two profitable quarters this year, its content spend is expected to hit $8 billion for 2018, making it cash flow negative for the year. But investors seem to ber confident in the streaming giant’s ability to turn free-cash-flow positive, and they already seem to be pricing that in as the stock’s price-to-earnings ratio sits at 238.

Goldman Sachs analyst Heath Terry agrees, he says positive cash flow is just around the corner — he raised his price target to $490 a share, roughly 30% above current levels.

“2018 will be the peak negative free cash flow year for Netflix, with revenue growth beginning to outpace content spend growth next year,” Terry wrote in a note sent out to clients on Wednesday. He expects 2022 to be an “inflection” point, which will see the company hit the $500 million free cash flow mark.

Netflix’s big content spend has been a sound investment, enabling it to continue to capture more subscribers and therefore more revenue, Terry said.

Terry expects Netflix to spend $14 billion on content this year. And while the company has highlighted an $8 billion figure for content spending, Terry says that only refers to the amortization of library content and that the total number is $14 billion, found on the Netflix’s cash flow statement.

“Cash spend correlates strongly with future subscriber growth,” he said. “The company’s streaming content …read more

Source:: Business Insider


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