Wall Street analysts are showing building enthusiasm for Netflix Inc.’s ability to translate its crackdown on account sharing into meaningful revenue.
The latest bit of enthusiasm came from Pivotal Research Group analyst Jeff Wlodarczak, who upped his price target on Netflix shares to $535 from $425 Friday, cheering the password-sharing clampdown, among other drivers. His $535 target was now the highest listed on FactSet, above Wells Fargo’s $500 target, which ranked second.
Netflix “represents a unique tech growth story given it remains well positioned to generate solid subscriber and revenue/free cash flow growth even in a potential global recessionary environment via their better monetization of the approximate 100+M households that currently utilize NFLX outside of paying households via password sharing,” Wlodarczak wrote.
The company’s launch of an advertising-supported tier of service last fall plays into the thesis as well.
With the password-sharing crackdown, Netflix is hoping that subscribers will either pay extra to add additional users to their accounts or kick off freeloaders, who will be moved to sign up for accounts of their own. In the second case, “having an ad-supported product should be helpful in this area,” Wlodarczak noted. That lower-priced tier could prove appealing to subscribers who must pay for Netflix on their own for the first time.
Netflix seems to be having early success with its move to rein in account sharing, according to third-party data from YipitData recently shared with MarketWatch. YipitData noted that Netflix recently emailed about 30% of its U.S. and U.K. subscriber bases about its crackdown plans, versus about 40% of its Canada base in an earlier test of the program.
“Users appear less reactive to either cancel or add extra members following initial email notifications in the U.S. and U.K. vs. Canada,” YipitData said. It estimated that only 0.5% of notified subscribers in the U.S. that received emails so far “churned,” or left the service, while 0.9% of subscribers added new members. In Canada, which is farther along in the crackdown, YipitData calculated 7% churn and an 8% boost to new members.
Shares of Netflix have gained 39% so far in 2023.