An ad-supported plan set to launch by streaming leader Netflix Inc NFLX is one of the most anticipated events in the streaming sector. One analyst said it might not be priced into shares of the stock.
The Netflix Analyst: Evercore ISI analyst Mark Mahaney upgraded shares of Netflix from In-Line to Outperform and raised the price target from $245 to $300.
The Analyst Takeaways: Mahaney upgraded shares based on new surveys and an analysis of the revenue opportunities the streaming giant had from its ad-supported plan and crack down on password sharing.
“We believe these opportunities, especially the ad-supported service constitute growth curve initiatives — catalysts that can drive a material reacceleration in revenue growth,” Mahaney said.
The analyst said the revenue opportunities from the new initiatives may not be factored not Street estimates for Netflix or its current share price.
“At a high level, the core Netflix long thesis has been severely tested over the last nine months, but we believe the global streaming market remains attractive.”
Mahaney called the ad-supported plan a clear catalyst coming for the company. The analyst saw the new plan helped bring back around 20% of churned users and reviews of competitors hint at a strong demand.
“All this suggests the potential for approximately 10 million in incremental subscriber net adds and $1 billion to $2 billion in incremental by 2024 — enough to change ’24 market revenue growth forecasts from 10% to mid-teens.”
The password-sharing plans from Netflix could add another $500 million to $1 billion in revenue according to estimates from analysts.
NFLX Price Action: Netflix shares are up 6.56% to $238.94 on Thursday versus a 52-week range of $162.71 to $700.99.
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