Netflix Reaching 40M AVOD Viewers By 3Q23? Skeptical Analyst Thinks It's Unlikely

  • Netflix, Inc NFLX estimated its ad-supported streaming plan can add 40 million unique viewers by the third quarter of 2023.
  • KeyBanc analyst Justin Patterson reiterated a Sector Weight on Netflix given a valuation pricing in more ad success and intense content competition.
  • For several reasons, Patterson was skeptical over Netflix reaching 40 million ad-supported viewers by 3Q23.
  • Also Read: Ad-Supported Plan From Netflix Not Priced Into Stock: 'Can Drive A Material Reacceleration In Revenue Growth'
  • Netflix plans to launch in countries with more developed ad markets, which implies initial launches will focus on its most penetrated markets, and non-Netflix subscribers in these markets tend to be older and prefer live TV. 
  • Thus, Netflix would likely cannibalize a significant percentage of existing subscribers. All these will raise questions over ad revenue being margin accretive in year one. 
  • Netflix's stance toward advertising (both publicly and in stories such as in The WSJ) continues to evolve around launch timing and scope. The analyst said it is likely an aspirational target and not formal guidance, given the market inhibitors.
  • Price Action: NFLX shares traded higher by 5.21% at $235.85 on the last check Thursday.
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