Netflix Creeps Closer to Investment Grade With Cash, User Growth
Netflix Inc. signage is displayed on an Apple Inc. iPhone. (Photographer: Gabby Jones/Bloomberg)

Netflix Creeps Closer to Investment Grade With Cash, User Growth

Netflix Inc.’s long-term credit rating was upgraded two notches by Moody’s Investors Service, putting it on the cusp of investment-grade ratings.

The streaming service is now rated Ba1, one step into junk, Moody’s said in a report Thursday. The upgrade reflects Netflix’s strong subscriber growth and expanding operating margins, and the rating outlook remains positive.

Netflix’s junk bonds have been trading like investment grade since last year, building on years of cash growth and the company’s commitment to forgo further debt offerings. It added 8.51 million new subscribers in the final three months of 2020 as users binged shows like “Bridgerton” and “The Queen’s Gambit,” lifting its total subscriber count to over 200 million.

Its most actively-traded bonds, the 4.875% notes due 2030 rising one cent to 116.75 cents, according to Trace. The 2028 bonds also rose by half a point.

Moody’s rank now equals that of S&P Global Ratings, which upgraded Netflix in January following its fourth-quarter earnings. The BB+ rating also carries a positive outlook.

Netflix fits into a broader trend in the junk market that has seen a wave of upgrades over the past year as companies capitalize on an economic rebound from the depths of Covid-19. Dell Technologies Inc. is also poised to shed its high-yield ratings after announcing plans to spin off its stake in VMware late Wednesday.

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