2023-03-23 06:20:00 ET
It's no surprise that Netflix (NASDAQ: NFLX) shareholders have relentlessly focused on one metric above all others -- subscriber growth. When the streaming giant lost 1.2 million customers in the first six months of 2022, it hurt investor confidence in the company's growth story. But their worries were eased when Netflix reported that it had added a better-than-expected 7.7 million members in the fourth quarter. The stock was down more than 70% at one point last year, but it's up 84% since then, mimicking the trend with subscriber numbers.
But now that Netflix is hitting a new phase in its lifecycle, one characterized by financial optimization rather than the pursuit of monster growth, shareholders ought to start focusing on another key metric. In fact, we are seeing Netflix hit a major milestone. Does this mean now is the right time to buy shares of the streaming leader ?
Throughout most of the past decade, Netflix was able to achieve impressive growth by investing tens of billions each year in licensed and produced content to attract an ever-growing number of viewers. This was the right strategy, in part due to the Federal Reserve's loose monetary policy and favorable capital markets. The question, however, was whether Netflix would ever be able to achieve the ultimate purpose of an enterprise, which is to generate positive free cash flow (FCF).
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Netflix Expects to Hit a Major Milestone in 2023. Time to Buy the Stock?