Buckingham Research Group has slashed its rating for Netflix Inc. shares to neutral from buy, citing concerns over the company's cash burn.
However, Netflix shares rose 13 percent to a record high on Tuesday after the video streaming service trounced Wall Street targets for new subscribers in the fourth quarter.
Shares in Los Gatos, California-based Netflix were up 11.7 percent at $254.31 on the Nasdaq. At Tuesday’s session high of $257.71, the company was worth about $111.5 billion.
The company's "continued share momentum depends on market confidence that NFLX's guided $3.0-4.0B in negative 2018 free cash flow will generate superior investment returns," CNBC reported the firm's analyst as writing.
"We are confident in Netflix's position as a global streaming leader with new entrants like Disney more apt to be complements than replacements," analyst Matthew Harrigan wrote in a note to clients Tuesday.
He lowered Buckingham’s rating for Netflix shares to neutral from buy, citing concerns over the company's spending on content to boost profit down the road.
"Nonetheless, continued share momentum depends on market confidence that NFLX's guided $3.0-4.0B in negative 2018 free cash flow will generate superior investment returns."
Meanwhile, at least 16 brokerages raised their price targets for the company’s shares by as much as $72. Analysts at Bernstein were most bullish, setting targets of $302 compared to the $252 it traded at on Tuesday, Reuters reported.
The video-streaming giant crossed $100 billion market value for the first time and was on track to add more than $10 billion if current prices hold.
In a statement after markets closed on Monday, Netflix said it added 6.36 million subscribers in international markets in the fourth quarter, beating analysts’ expectations of 5.1 million, according to FactSet.
It now has 117.58 million streaming subscribers globally.
“Overall, this was a ‘home run quarter’ for Netflix and should put any lingering worries to rest around sub(scriber) growth, international ramp, and the ‘negative’ possible effects from the (subscription) price increase,” GBH Insights analyst Daniel Ives said.
The company, which showcased popular returning series “Stranger Things”, “The Crown” and “Black Mirror” in the quarter, in October hiked its monthly fees for U.S. customers for the first time in two years.
“The subscriber growth validates management’s ongoing content investment, and should contribute to comfort with 2018’s increased $7.5-8.0B content spend and associated marketing to support the content slate and ever-growing library,” Canaccord Genuity analyst Michael Graham said.
Netflix and its peers Hulu and Amazon.com Inc.’s Prime Video are steadily increasing budgets for producing original shows as they gain market share from traditional cable TV providers.
In contrast, U.S. wireless carrier Verizon Communications Inc. said on Tuesday that it lost a net of 29,000 Fios Video connections in the latest quarter, reflecting the shift from traditional linear video to over-the-top offerings.
And while Netflix is using its newly minted $100 billion market capitalization to tout a return to the junk-bond market, debt investors may cast a skeptical eye on the online TV network, Bloomberg explained.
“When will the company ever produce positive free cash flow?" Bloomberg Intelligence analyst Stephen Flynn said in an interview. "The challenge for a bondholder is your upside is not the same as it is for an equity holder.”
Netflix has tapped debt markets before to fund the production of TV shows and movies, and said Monday it would increase the budget for marketing of programs, as well as technology. It most recently sold $1.6 billion of bonds in its largest-ever dollar-denominated sale in October.
“We anticipate continuing to raise capital in the high-yield market,” Los Gatos, California-based Netflix said in a presentation Monday when it posted its fourth-quarter earnings. “High-yield has rarely seen an equity cushion so thick.”
Debt-to-market capitalization isn’t a widely followed measure, Flynn said, but for Netflix, it’s the one where it shines relative to its peers. At 6 percent, its ratio is significantly lower than those of higher-rated media companies such as Walt Disney Co. and Viacom Inc.
“If you’re in Netflix’s position, it’s something you should talk about,” Flynn said. “It’s the best way to position your credit profile.”
(Newsmax wire services contributed to this report).
© 2026 Newsmax Finance. All rights reserved.