Netflix Analyst Says Falling Churn, Strong Late April Subscriber Trends Boost Hopes


Netflix Inc NFLX reported strong net subscriber adds for the first quarter, and its subscriber base is only getting better, according to an analyst at BofA Securities.

The Netflix Analyst

Analyst Nat Schindler maintained a Buy rating on Netflix with a $525 price target.

The Netflix Thesis

Netflix's April churn declined to a monthly rate of 2.4%, Schindler said, citing data from ANTENNA. The churn rate refers to the percentage of subscribers who either cancel or don't renew their subscriptions in a given period. 

Following the stabilization in the churn rate in the January and February period ahead of the coronavirus outbreak, the churn rate improved in the March-April period amid stay-at-home orders, the analyst said. 

The lower month-over-month churn rate in April is a positive signal for Netflix's guidance for 7.5 million global subscriber adds in the second quarter, he said. 

Schindler said he's waiting to see how the May-June period turns out as stay-at-home restrictions are eased.

Referring to weekly Netflix sign-up data, BofA said a surge in sign up growth was clustered around the weeks of March 16 through March 30, suggesting some of the sign ups will accrue to the second quarter. This is because Netflix can recognize users as paid subscribers only after the trial period ends, according to BofA. 

The research firm expects U.S.-Canada subscriber additions to increase quarter-over-quarter.

Netflix's late April strength also gives hope that subscriber additions may remain healthy, allaying any worries concerning a weaker second half, Schindler said.

Historically, late April sees seasonal weakening relative to January, the analyst said. 


BofA is bracing for a strong second-quarter subscriber print and a long-term penetration increase.

"We think global subscriber strength could last longer than seen as we expect some social distancing (impacting large events, cinemas, sports games) may remain into 2H." 

NFLX Price Action

At last check, Netflix shares were rising 2.23% to $441.45. 

Related Links:

Netflix Working On 'Social Distance,' A New Show From The Maker Of 'Orange Is The New Black'

How The COVID-19 Pandemic Will Affect Netflix And Roku Going Forward

Photo courtesy of Netflix. 

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