One Secret to Netflix's Improving Profitability
Netflix (NASDAQ: NFLX) burned a record amount of cash last year, with free cash flow hitting -$3.3 billion.
That's one of several reasons bears have been skeptical of the leading streamer, along with rising competition and a maturing U.S. market with rapidly slowing growth.
Despite the excessive cash burn, Netflix nonetheless executed on its goal of delivering an operating margin of 13% last year. The key drivers of that were its 27.8 million new subscribers and a price hike that helped revenue jump 28% to $20.2 billion. However, one overlooked aspect of Netflix's improving profitability is its operating leverage, especially in its marketing budget, and as the company aims to grow its operating margin to 16% in 2020, investors should keep an eye on that line item.
Source Fool.com
