Topline
Netflix’s stock could soon surge to its highest level in more than a year, analysts forecasted, thanks to the streaming service’s clampdown on account sharing launched domestically Tuesday.
Key Facts
Netflix’s initiative limiting accounts to one household can add millions of paid subscribers this year, Wolfe Research strategists headed by Peter Supino wrote in a recent note to clients, maintaining their buy rating for the stock at a $388 price target, implying 8% upside from Netflix’s $359 share price Wednesday.
Oppenheimer analysts led by Jason Helfstein were far more optimistic about Netflix’s prospects after the rollout of its long-awaited password crackdown, raising its target 8% from $415 to $450, forecasting the stock to surge more than 25% to its highest level since last January.
Consensus future revenue estimates do not bake in the “true benefits” of the password clampdown and Netflix’s cheaper ad tier, according to Oppenheimer, citing a survey it recently conducted of nearly 2,000 American Netflix users.
About 30% of respondents to the poll who said they expected to lose access to Netflix under the new rules said they would pay for their own subscription, which Oppenheimer estimates would result in nine million net new subscribers in the U.S. and Canada.
That level of growth would smash Wall Street’s expectations: Consensus analyst estimates forecast Netflix’s U.S. and Canada subscriber base to swell by 3.2 million by the end of next year, according to FactSet.
Contra
Even if Netflix’s stock surges as high as $450, that would still be 35% below its nearly $700 peak achieved November 2021. Netflix shares collapsed by as much as 70% last year after it notched consecutive quarters of subscriber losses, something the company had not reported in more than a decade. The streamer reported 74.4 million American and Canadian subscribers at the conclusion of 2023’s first quarter, about half a million shy of its late 2020 level despite three consecutive quarters of growth.
Surprising Fact
Netflix’s 21% rally year-to-date comes amid similar rallies among other West Coast technology giants: Alphabet, Apple, Amazon, Microsoft and Meta are all up 30% or more this year.
Netflix Starts Long-Awaited Password-Sharing Crackdown—Here’s How (Forbes)
Netflix Earnings: Stock Slides As Profit Outlook Weakens—Despite Subscriber Growth (Forbes)
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