Sweeping the Netflix Landscape: Cracking Down on Password Sharing Could Lead to 36M New Subscribers

  • Netflix, Inc NFLX stock is up Wednesday as the streaming firm initiated its password-sharing crackdown.
  • The session volume reached 4.27 million versus the 100-day average volume of 6.7 million.
  • The company launched new features to help members with the transition, including transferring a profile to a new membership account and adding an extra member to their account for $7.99 a month. 
  • Oppenheimer analyst Jason Helfstein maintained an Outperform rating on Netflix and raised the price target from $415 to $450.
  • Before Netflix's move, the analyst surveyed 1,800 U.S. NFLX consumers indicating a healthy propensity to pay for "remote" users, with some abandoned users willing to pay for their subscriptions
  • Close to 80% of the respondents pay for NFLX, and 48% support "free" users outside their household, suggesting the potential for ~36 million new subscribers. 
  • While 45% of respondents indicated a willingness to pay for "remote" users, 70% showed a propensity to a $6.99 ad-tier plan. 
  • With pricing above ad tier, the analyst's survey suggests a significant portion of these users will be pushed towards advertising. 
  • The premium valuation reflects the multiple tailwinds, including decreased competition, the long-term unwind of linear TV, the launch of advertising & password sharing. Furthermore, the analyst believes the estimates do not adequately reflect actual benefits from password sharing & advertising tier.
  • Price Action: NFLX shares traded higher by 0.95% at $359.37 on the last check Wednesday.
  • Photo by Gerd Altmann from Pixabay
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