Netflix Eyes Major Acquisition
Netflix (NASDAQ: NFLX) has announced a transformative deal to acquire Warner Bros. Discovery’s film and television studios, HBO, and the HBO Max streaming service for $82.7 billion. If successful, this acquisition would enhance Netflix’s content library, adding iconic franchises such as Game of Thrones and the Harry Potter series. The deal faces regulatory scrutiny and is expected to significantly impact Netflix’s balance sheet, as it plans to finance the majority of the acquisition through debt, which could total around $77 billion.
Current Financial Standing
As of now, Netflix boasts over 300 million paid subscribers and generates more than $0.20 in free cash flow for every revenue dollar. However, concerns about the acquisition’s financial burden have contributed to a nearly 30% decline in its stock price from its all-time high. Netflix has produced $9 billion in free cash flow over the past year, but analysts predict it will take several years to effectively manage the acquired debt.
Growth Prospects
Despite the current challenges, analysts anticipate annualized earnings growth of 24% over the long term for Netflix, hinting at a potential doubling of its bottom line every three years. The company continues to explore new revenue streams, including ad-supported membership tiers, password-sharing enforcement, and ventures into live sports and video podcasts, positioning itself for future growth.
