Could Netflix Return to Positive Free Cash Flow by 2022?

Negative free cash flow

Netflix (NFLX) has been generating negative FCF (free cash flow) for several quarters as it invests aggressively in high-quality original content to grow its subscriber base. In the first quarter, Netflix’s FCF dropped YoY (year-over-year) to -$460 million from -$287 million.

This year, Netflix expects its FCF to drop YoY to around -$3.5 billion from -$3 billion due to its spending on original content and higher cash tax. The streaming king invested more than $8 billion in original programming in 2018 and has plans to continue to do so this year.

Could Netflix Return to Positive Free Cash Flow by 2022?

Netflix striving to improve FCF

Netflix is pushing to grow its subscriber base, revenue, and operating margin, which could boost its FCF and fund its investments. It forecasts its FCF improving in 2020. Wolfe Research managing director Marci Ryvicker anticipates Netflix generating positive FCF by 2022, with “its breadth and depth of quality content” driving “sustainable pricing power.”

Netflix raised the cost of its monthly subscription plans by 13%–18% in the US in January, and is working on increasing its subscription prices in Brazil, Mexico, and parts of Europe. The move could draw more subscribers and higher revenue, helping the company pay off its massive debt.