Netflix should see accelerated subscriber growth and slower subscriber churn with the launch of its lower-priced ad tier, analysts at Oppenheimer believe.
“Despite increased competition, Netflix remains the dominant streaming platform maintaining the largest market share of US TV viewership,” Oppenheimer analysts wrote following the streaming giant’s 1Q results.
The group is forecasting Netflix’s global advertising tier revenue to reach $6 billion by 2025, which Oppenheimer anticipates will drive an incremental $5 billion of revenue.
“Comments around (the) roll-out of Paid Sharing in Canada…should reduce investor fears of higher-than-expected churn,” Oppenheimer wrote.
Analysts noted that Netflix’s paid membership base now larger in Canada, with revenue growing faster than the US.
Based on Paid Sharing roll-out and the long-term advertising opportunity, Oppenheimer is reiterating its $415 target price and Outperform rating on the stock.
“While ad revenue won't be material until 2024, US ad-tier monetization (subscription + ad revenue per membership) is now greater than the standard sub plan, with global ad-tier monetization greater than basic plan,” analysts noted.
Netflix’s password crackdown is still expected to drive short-term churn, according to Oppenheimer, but will drive second-half revenue acceleration in subscribers and monetization.
Contact Angela at angela@proactiveinvestors.com
Follow her on Twitter @AHarmantas