Moody's hikes Netflix notes

Moody's Investors Service said it upgraded Netflix, Inc.'s senior unsecured notes ratings to Baa3 from Ba1. As the company is now investment grade, the agency withdrew Netflix's Ba1 corporate family rating, Ba1-PD probability of default rating and SGL-1 speculative grade liquidity rating.

“The upgrade to Netflix's senior unsecured notes ratings to investment grade reflects Moody's expectation that Netflix will remain the leading direct-to-consumer subscription-video-on-demand (SVOD) single tier-1 platform in the world, execute effectively despite an increasingly competitive landscape, and continue to improve its fundamental and financial credit profile.

“Fundamental improvement is expected from revenue and membership growth and operating margin expansion. Governance considerations, specifically the company's implementation of a target debt range of $10 to $15 billion which they are now squarely in, demonstrates their commitment to sustaining investment-grade credit metrics,” the agency said in a statement.

Moody's said it forecasts Netflix’s gross debt to EBITDA with Moody's adjustments to decline to about 2.5x by year-end 2023, which positions the company strongly for the Baa3 rating.

The outlook is positive.

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