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Why Netflix stock is jumping again

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In the early days of NetflixTed Sarandos, Co-CEO, has spiced up his team in charge of filling the service with an eye to the future.

“I used to try to get the team to look at the potential scope of the business by saying things like,” Someday we’ll be big enough to have a vice president for anime, “Sarandos recalled this week. “And then one day it will be now.”

It’s true – Netflix hired Rob Pereyda as the first anime boss last year, the Japanese action cartoon genre.

And “one day is now” when the company reached two major milestones in late 2020. Netflix attracted more than 200 million paying subscribers. And after spending billions and billions of other people’s money to cover large deficits over the past decade, Netflix has achieved financial self-sufficiency and created a sustainable entertainment juggernaut.

This must have been the mood at the Netflix headquarters outside the company announced its results on Tuesday afternoon:

Wall Street, as usual, focused on the small picture. How many subscribers did they add during the quarter versus how many they added, and how many, on average, did analysts predict they would add? (The answers were 8.5 million, 6 million and 5.9 million, respectively, by the way.)

But it was more the big picture that made the stock zoom in. Page 5 of Netflix’s quarterly profit letter to shareholders highlighted (or buried) the disclosure that the company would generate positive cash flow this year despite spending nearly $ 20 billion on new programming. With $ 8 billion in cash, this means, “We believe we no longer need external funding for our day-to-day operations.” The cash will be so plentiful that the company will even buy back some of its stock, a common price support Practice that Netflix has not practiced since 2011. Even investors who haven’t seen it for a second Bridgerton know that’s positive.

Netflix stock, already valued at over $ 500 billion, gained 14% in premarket trading Wednesday morning to nearly $ 574, within $ 2 of its all-time high. Despite up 67% as a leading member of the pandemic portfolio last year, the stock had already lost 7% by 2021.

Another change in tone and approach was highlighted in the shareholders’ letter. Netflix was formerly known as a studio that wouldn’t divide the audience and wouldn’t even tell stars and producers how well their shows and movies were doing. But now there is a lot of data. Midnight skyThe dystopian science fiction thriller directed by George Clooney drew 72 million households in the first four weeks. Vacation film rated less well Holidate with Emma Roberts attracted 68 million households. And the new favorite in the Pressman household, the French miniseries lupine The lead role of Omar Sy released this month is expected to top 70 million in the first four weeks.

Cest magnifique!

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

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