Wall Street analysts are increasingly bullish on Netflix amid the streaming service’s ongoing crackdown on users’ sharing of passwords and the strike by Hollywood actors and writers that could impact the supply of fresh content this fall.
Netflix, which is poised to release its second-quarter earnings on Wednesday after the end of the trading day, has seen its stock price soar in 2023. As of the close of trading on Tuesday, Netflix stock was up more than 60% year-to-date, having risen from just under $295 per share at the start of the year to $474.80 at Tuesday’s close.
Deutsche Bank is one of the leading firms that released an analysis of Netflix stock, granting it a buy rating and hiking its price target from $410 to $475 on Monday. Analysts from Deutsche Bank wrote that Netflix has one of the few "clean" revenue growth stories in media and communications and noted, "Virtually all of the headwinds plaguing the traditional TV focused media companies are tailwinds for Netflix."
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The Deutsche Bank analysts’ findings were based in part on Netflix’s "paid sharing" initiative under which users who wish to share their passwords with family and friends may continue to do so after paying a nominal fee. Their research indicated that the initiative would generate $900 million in incremental revenue in 2023 and $3.4 billion in 2024 before ramping up to $4.5 billion in 2025.
Credit Suisse also increased its price target for Netflix stock, as an analyst for the firm boosted its target from $331 to $370 last week while maintaining a "neutral" rating.
Last year before the password-sharing crackdown began, Netflix told investors that the company estimated there were more than 100 million households – which the company defines as people living under the same roof – accessing the streaming service using an account that doesn’t belong to a member of their household.
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Deutsche Bank’s analysis assumed that 50% of the 100 million non-paying, password-sharing households will convert to a paid account of some sort. Further, it assumed that about 40% of "converters" would create new accounts while 60% would be added to existing accounts as extra members.
The paid password-sharing initiative began in earnest this May, under which users with the standard $15.49 per month plan can pay an extra $7.99 each month to let one other person share their account, and subscribers to Netflix’s premium plan that costs $19.999 monthly provides an extra sharing slot.
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Following the change, subscription data analysis firm Antenna found that June was Netflix’s biggest-ever month in terms of subscriber growth since it has been tracking the platform with 3.5 million gross additions last month. That followed the biggest four-day jump in Netflix subscribers that Antenna has tracked, which occurred from May 25 to May 28 after the policy change was implemented.
The ongoing strikes by the Writers Guild of America and the Screen Actors Guild – American Federation of Television and Radio artists (SAG-AFTRA) have created substantial uncertainty over whether there will be disruption of TV and movie releases this fall and early next year. While a protracted strike could impact Netflix's access to fresh content to a degree, it may avoid some of the fallout given the amount of TV series and movies featured on Netflix that were produced overseas.
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Former Paramount and 20th Century Fox CEO Barry Diller warned in an appearance on CBS’ "Face the Nation" that if the striking actors and writers fail to reach an agreement with studio companies it could lead to an "absolute collapse" of the industry if the strike lasts beyond September 1.
"What will happen is, if in fact, it doesn’t get settled until Christmas or so, then next year, there’s not going to be many programs for anybody to watch," Diller said. "So, you’re gonna see subscriptions get pulled, which is going to reduce the revenue of all these movie companies, television companies, the result of which is that there will be no programs. And at just the time, strike is settled that you want to get back up, there won’t be enough money."
FOX Business’ Elizabeth Stanton contributed to this report.
