Netflix's negative free cash flow, which reached a high of $3 billion in 2018, has been one of the few sources of worry for Wall Street analysts and investors.
Netflix has said it needs negative free cash flow to fund its increased investment in original TV shows and movies, but it's hard to assess the value of that content over their lifetime, making it difficult to project the company's financial future.
But Morgan Stanley sees signs that Netflix's financials are on the right track and predicts the streaming giant will become free cash flow positive in 2021 and reach over $10 billion in positive free cash flow in 2025.
"When we produce an amazing show like 'Stranger Things,' that's a lot of capital up front, and then you get a payout over it over many years," Hastings said.
Netflix's production of original series like "Stranger Things" has ramped up over the last few years, and the company has made moves to own the entire production and distribution pipeline by signing big-name hitmakers like Shonda Rhimes and Ryan Murphy in deals worth hundreds of millions.
That strategy has been validated as competitors from Disney to AT have announced their own streaming services, and the market for licensing TV shows and movies has become increasingly crowded.