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Netflix Is Now More Valuable Than Disney

Netflix Is Now More Valuable Than Disney

May 24, 2018 / No Comments

Netflix stock climbed again Thursday to record highs — pushing the video-streaming leader’s market capitalization past media giant Disney for the first time.

As of 12:15 p.m. ET, Netflix shares were up 1.9%, to an all-time high of $351.09 per share. That gives the company a market cap of nearly $162 billion.

Disney’s stock was down 1.1% in midday trading, to $101.74 per share, yielding a market cap of close to $152 billion.

On Wednesday, Netflix’s market cap surpassed that of Comcast, the cable and media giant that’s poised to start a bidding war with Disney to acquire 21st Century Fox assets.

Year to date, Netflix shares now have increased more than 80% in value.

The seemingly insatiable investor enthusiasm for Netflix calls to mind CEO Reed Hastings warning five years ago about irrational exuberance amid volatile swings in the company’s stock price at the time: “In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003,” he wrote in an October 2013 letter to investors.

Defying skeptics, Netflix has continued to sustain a high rate of growth worldwide. It beat expectations for subscriber additions for the first quarter of 2018 both in the U.S. and abroad, to stand at 125 million worldwide.

For Q1, Netflix reported $3.7 billion in revenue, up 40% year over year, and net income of $290 million, up 63%. Significantly, the company kept on growing its sub base despite rate increases in the U.S. and other territories that rolled out widely in Q4 2017.

At the same time, Netflix is burning through tons of cash as it spends an ever-increasing amount on original content for its global audience — and it expects the business to be free-cash-flow negative for the next few years. The company will spend upwards of $8 billion on content in 2018, with 85% of new spending being poured into original programming, according to chief content officer Ted Sarandos.

Last month, the company closed a $1.9 billion round of debt financing, its biggest to date, to fuel its content binge-spending.

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