Netflix was upgraded to Baa3 from Ba1 by Moody’s into investment grade territory on expectations that it will stay as the leading direct-to-consumer subscription-video-on-demand (SVOD) single Tier-1 platform in the world. This is despite an increasingly competitive landscape they noted where Netflix would continue to improve its fundamental and credit profile. Fundamental uptick would come from revenue and membership growth and operating margin expansion. Regarding financial metrics, gross debt-to-EBITDA is set to to drop to around 2.5x end-2023. Moody’s adds that its static debt levels combined with revenue growth and improving margin would further strengthen its credit metrics. They have no debt maturities in 2023, only $400mn in 2024 and ~$1.8bn in 2025 and an “excellent liquidity profile” with cash balances of over $5bn.
Netflix’s bonds were trading slightly higher with its 5.875% 2028s up 0.8 points to 103.48, yielding 5.15%
