Netflix leads the video streaming industry that is quickly gaining the interest of investors. However, Muslim investors may be wondering if Netflix stock is halal or not. To find out whether Netflix is Shariah-compliant, we will use the following three criteria:
- The business activity
- Interest-bearing debt to company’s market capitalization
- Interest-bearing securities to company’s market capitalization
Netflix’s Business
Stock – Netflix
Ticker – NASDAQ: NFLX
Sector – Communication Services
Compliance Status – Questionable
Netflix, Inc. operates as a streaming entertainment service company. The company is headquartered in Los Gatos, California, and currently employs 9,400 full-time employees. Furthermore, the company went IPO on May 23, 2002. Members may view a range of television (TV) shows, documentaries, and feature films from several genres and languages through the company’s paid streaming subscriptions, which are available in over 190 countries. Netflix’s digital versatile disc (DVD)-by-mail service is also available in the United States. In addition, The firm provides several streaming subscription options, the cost of which varies according to the location and the plan’s features. Its plans range in price from $2 to $24 per month. Netflix material is available on various Internet-connected devices, such as televisions (TVs), digital video players, TV set-top boxes, and mobile devices. Moreover, the contents are acquired, licensed, and produced by the company, including original programming.
Financial Screening
Firstly, we check business activity to know if Netflix is Shariah-Complaint. Netflix’s business model is quite simple, it offers a streaming service and profits from subscribers. However, it will be difficult to categorize how much streaming material is Islamically acceptable or not. Besides, the company’s 97.51% of total revenue comes from questionable activities. And 2.49% of its revenue comes from impermissible business activities. Since questionable business segments may exceed 5% of its total revenue, Netflix’s business activity does not pass the first screening criteria.
Secondly, we screen its interest-bearing debt ratio. The debt amount should not exceed 30% of its market cap. In the case of Netflix, the percentage of interest-bearing debt is 7.49% of its market cap. So, we can conclude that it meets the criteria.
| Total Interest-Bearing Debt | 14.53B |
| 36 Month Average Market Capitalization | 193.97B |
Finally, we screen the interest-bearing securities ratio. Netflix’s interest-bearing securities account for 3.10% of its market cap. The number of securities that aim to receive interest should not exceed 30% of its market cap. So, it meets the last criteria as well.
| Cash and Interest-Bearing Securities | 6.01B |
| 36 Month Average Market Capitalization | 193.97B |
Despite passing two financial screening requirements, Netflix generates more than 5% of its total income from unknown commercial operations. As a result, from a Sharia perspective, Netflix stock is one of the questionable stocks, and for Muslim investors, it is better not to invest in such questionable assets.
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