Shares of Netflix took a turn for the worse in the fourth quarter on concerns over a crackdown on password sharing, and that relative weakness has made the stock attractive, according to analysts at Oppenheimer.
The firm issued a $415 price target and an Outperform rating.
“First quarter engagement is trending weaker than the previous two quarters, but in line with NFLX's previous 6-quarter average,” analysts said. “Meanwhile, competitors appear more focused on profitability, suggesting we are past peak competition, as evidenced by NFLX's second highest streaming net adds in 4Q, recent increased content spend efficiency, and 4Q mgmt. comments around lower churn.”
Oppenheimer analysts aren’t particularly worried about account sharing enforcement.
“While enforcement of account sharing should drive material upside to revenue long term, investors look at this as a headwind to the stock,” analysts said. “Depending on the recapture rate, we see $2 billion - $8 billion revenue upside representing 6%-23% of our ’23 revenue estimate. More importantly, the incremental revenue would be close to 100% margin.”
Netflix shares traded 3% higher at $312.95 Thursday morning.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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