Netflix Inc (NASDAQ:NFLX)
The price target that an analyst had set for Netflix stock was significantly increased on Friday after he said that the streaming company “represents a unique tech growth story.” Netflix stock was trading higher as a result of this increase.
In a report published on Friday, an analyst with Pivotal Research Group named Jeffrey Wlodarczak maintained his Buy rating on shares of Netflix (NASDAQ:NFLX), but raised his target price for the stock from $425 to $535. According to the responses of analysts polled by FactSet, this is the most likely outcome.
During trading on Friday morning, shares of Netflix rose 3.5% to a price of $423.77. The price of the stock has increased by 44% since the beginning of the year.
The analyst believes that because the company is cracking down on the more than 100 million households that are using its services through password sharing, it is well positioned for subscriber growth, revenue growth, and free cash flow growth, even in an economic environment that is challenging.
“This should be enhanced by the subscriber and subscriber monetization benefits from their ad-supported tier,” said Wlodarczak. In November, Netflix launched its new service, which is supported by advertisements.
Password Crackdown: Protecting User Privacy and Tackling Account Sharing
In addition to the upgrade, Netflix has also implemented a strict crackdown on password sharing and unauthorized account usage. While some users may view this as a hindrance, it is crucial to recognize the underlying motivations behind this move. By safeguarding user privacy and tackling account sharing, Netflix aims to maintain a fair and sustainable model for content creators, ensuring that artists and production companies receive proper compensation for their work.
The company started sending email messages to customers who accessed their accounts from more than one location a month ago, which marked the beginning of the crackdown on customers who shared their passwords. According to a statement issued by the company on May 23, “A Netflix account is for use by one household,” Everyone who lives in that house can access Netflix no matter where they are, whether they are at home, on the road, or on vacation.
The tightening of the reins appears to be having the desired effect. According to a report published by The Wall Street Journal on Friday, Antenna, a company that specializes in streaming analytics, has been collecting data since 2019, and between May 25 and May 28, the company acquired more new subscriptions in the United States than in any other four-day period.
Netflix’s upgrade and password crackdown carry significant implications for the streaming industry as a whole. Let’s explore some of the key aspects:
- Enhanced User Engagement and Retention
With a more seamless and personalized user experience, Netflix is poised to enhance user engagement and retention rates. By leveraging advanced algorithms, the platform can better understand user preferences and deliver content that aligns with their tastes. This increased engagement not only benefits Netflix but also offers opportunities for content creators to reach a more targeted audience.
- Improved Content Discovery
The refined recommendation system allows users to discover new content that aligns with their interests. As a result, lesser-known movies, documentaries, and TV shows gain greater exposure, fostering a more diverse streaming landscape. By expanding the visibility of niche content, Netflix contributes to the growth and discovery of emerging talent, offering a platform for creators to showcase their work.
- Ensuring a Fair and Sustainable Model
Netflix’s crackdown on password sharing addresses the issue of account misuse, ensuring a fair and sustainable model for content creators. By curbing unauthorized access, the platform protects the rights of artists and production companies, encouraging the continued creation of high-quality content. This, in turn, fosters a vibrant streaming ecosystem where creativity thrives.
Wlodarczak stated that the company has distinguished itself from its rivals by achieving enormous economies of scale. He pointed to a surge in free cash flow over the years 2022 and 2023, which he expects to continue in the years 2024 and beyond.
In the event that both this year and the following one are prosperous, he believes that management will consider selling the company in 2025, and he refers to Microsoft (NASDAQ:MSFT) as “the most logical acquirer in our view.”
There are a number of analysts who share Wlodarczak’s positive outlook regarding Netflix. On Wednesday, the company was given an increased price target for both of its products. In June, FactSet polled analysts and found that 52% of them rate the stock as Buy, 41% rated it as Neutral, and 7% rated it as Sell.
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