Shelter-in-place orders, as well as other restrictions on consumer mobility, created the perfect environment for Netflix (NASDAQ: NFLX) in particular. In the first quarter of this year, Netflix only grew revenue 9.8%, and it lost 200,000 subscribers. Adding fuel to the fire was management's forecast that for Q2, Netflix would lose 2 million customers.
The damage wreaked there is more moderate and offset by coupon payments — a Netflix bond maturing in 2030 has returned a negative 19 per cent from recent peaks, a Coinbase 2031 bond negative 36 per cent and an AMC 2026 bond negative 19 per cent. Some of this is to do with the very different capital structures of the individual companies and risks of the bonds compared with equities. For hedge funds that profit from arbitrage trades across capital structures, such differences present a playground full of opportunities. First, the holder base for corporate bonds is largely institutional even though most investment-grade-rated issuance is publicly registered.
The tech-heavy Nasdaq Composite index is officially in a bear market after dropping 26% year to date, but some investors are on the hunt for bargains that could spike in value once more optimism returns to the markets. Looking specifically at the 100 largest non-financial companies listed -- otherwise known as the Nasdaq 100 -- Facebook parent Meta Platforms (NASDAQ: META) and Netflix (NASDAQ: NFLX) rank toward the bottom of the list in year-to-date performance. Revenue growth is decelerating at Meta due to weakening trends in the advertising market, while investors are wondering if Netflix can resume growing subscribers in a more competitive streaming market.