Topline
Netflix shares rallied to their highest price in more than a year Monday as analysts projected billions of dollars in fresh revenue stemming from the streaming service’s high-profile crackdown on password sharing among users and cheered on the ongoing Hollywood strike as a possible justification for further gains.
Key Facts
Netflix stock jumped as much as 3% to $457 in Monday morning trading, hitting their highest level since February 1, 2022.
The bounce comes after Deutsche Bank analyst Bryan Kraft bumped his price target for Netflix from $410 to $475 in a note to clients diving into the financial impact of Netflix’s initiative to curb rampant sharing of account information.
Netflix will reap about $9 billion in new revenue by 2025 thanks to the password program, Kraft estimated, predicting Netflix will add nearly 20 million new paid accounts by the end of next year.
Loop Capital analyst Alan Gould also upgraded his price target for Netflix considerably Monday, declaring Netflix “is winning the streaming wars as the traditional studios have ceased raising their spending in a struggle to reach profitability while Netflix has been profitable for years.”
Also driving Gould’s improved outlook for Netflix was his belief that the Hollywood strike “should enhance Netflix’s competitive advantage” and allow the company to have more cash in hand, explaining Netflix has the “largest backlog of content for streaming…and least “need of talent to promote its shows” among similar companies.
Key Background
Shares of the California-based media giant are now up a staggering 138% over the last year but remain 35% below their November 2021 all-time high of $692. Netflix will report second-quarter earnings Wednesday afternoon, revealing how it fared during the first quarter of its password sharing clampdown. Global subscribers are expected to grow by 1% to 235 million. Accompanying the recent account crackdown was Netflix’s rollout of a less expensive advertising membership tier. The “perfect complement” to the password sharing crackdown, Netflix’s ad tier will account for about 35% of all its users by 2030, according to Deutsche Bank, predicting Netflix will bring in $6 billion in annual ad revenue by the end of the decade (Netflix brought in roughly $32 billion of total sales in 2022).
Surprising Fact
Netflix is the fourth-best performing S&P 500 stock over the last 12 months but among the 60 worst-performing stocks since November 2021, according to FactSet data.
What To Watch For
In a recent note, MoffettNathanson analysts led by Michael Nathanson predicted that Netflix soon may pivot back toward its earlier model of acquiring outside-produced content on the cheap to grow its library as entertainment rivals like WarnerBros Discovery look to shore up their bottom lines. Acquired content accounts for about 53% of Netflix’s viewing time now, according to Nathanson’s analysis of Nielsen Media data.
Netflix Password Crackdown Can Boost Its Stock By 25%, Oppenheimer Says (Forbes)
Netflix Shares Dip As First Month Of Ad-Supported Subscription Reportedly Disappoints (Forbes)
Netflix Earnings: Stock Slides As Profit Outlook Weakens—Despite Subscriber Growth) (Forbes)
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