Oppenheimer remains upbeat on Netflix Inc (NASDAQ:NFLX) despite early issues with its new advertising tier as the tech giant remains the "dominant streaming" platform, said analysts, and maintains the largest market share of US TV viewership.
The broker repeated an 'Outperform' rating on Netflix shares and has a $365 share price target (current price: $288.30).
It comes following recent news that Netflix's ad-supported tier was off to a slow start and the company was now allowing advertisers to take money back for ads - even ones that have yet to be aired.
But analysts at Oppenheimer brushed off potential concerns.
They believe NFLX shares will be driven by subscriptions, not revenue, and data on viewership, they noted, adding that it was "not surprising" that the firm's ad launch had experienced some hiccups.
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"NFLX does not want to flood ads to meet commitments at expense of engagement," they said, adding that advertisers were also shifting non-holiday specific unspent funds to the first quarter.
Oppenheimer said it believes that the launch of a lower-priced ad tier will accelerate subscriber growth, drive annual revenue per unit (ARPU), and slow subscriber churn.
"Despite stronger industry churn, an examination of Nielsen viewership data shows most consumers continue to value NFLX as a core streaming platform," the analysts also highlighted.
"Netflix represents 80% of Nielsen's top ten weekly hours streamed in the quarter up to Nov. 20. Netflix's own weekly top ten categories show strong engagement from new original shows including Wednesday, which is already the third most-watched show of all time in the first 28 days on 19 days of data."
Oppenheimer said it remained "bullish" heading into 2023 as Netflix competitors continued to "pull back on content spend in favor of margins".
In its 2025 estimates, the broker forecasts Netflix’s global advertising tier revenue will come in at $6 billion, which will drive an incremental $5 billion of revenue.
Contact the writer at giles@proactiveinvestors.com