The tech sector as a whole has been hammered of late, with high flying companies like Netflix Inc. (NASDAQ:NFLX) feeling the pain as well. Despite growing its user base substantially, both in North American markets and abroad, investors have seeming become wary of the company’s growing debt load – a debt load which has continued to balloon faster than expected in recent quarters.
In late October, Netflix reported its earnings, showing continued light speed growth and bright prospects for the future. The company reported an additional six million subscribers in its most recent quarter, bringing the company’s total subscriber base to more than 130 million. This growth has shone a light on the ability of the company to continue to attract viewers to its streaming platform, amid a dearth of competitors who have grown content in lockstep with Netflix in a bid to take a bite out of the rather large pie which Netflix currently dominates.
Competition-related concerns aside (and I have many), Netfilx’s burgeoning debt load is of primary concern to many investors, including myself. The ability of a company like Netflix to be able to "grow out of" a recession remains unlikely, in my opinion, particularly if the debt-funded growth cycle the company is on stalls due to debt markets which potentially dry up in such as scenario.
All is well at the moment, but for existing shareholders in Netflix, I would recommend taking profits at current levels and reallocating to sectors of the economy which may be less exposed to the risks Netflix is currently exposed to, at this point in time.
Invest wisely, my friends.
Tech Insider
