Analysts at Oppenheimer have raised their price target for Netflix Inc (NASDAQ:NFLX) stock in anticipation of a higher subscriber count on bullish indicators for the streamer’s “paid sharing” rollout and increased revenue per subscriber with the potential discontinuation of its lowest-priced ad-free plan, which is currently being tested in Canada.
“Plan shift from lowest-priced ad-free tier is the obvious next step, unlocking about $15.50 revenue/subscription (advertising plus subscription) versus $9.99 (ad-free) and $6.99 ad-plan unlocking about $4.4 billion in annual revenue or 13% of '23E revenue,” analysts wrote in a note.
Separately, the analysts highlighted that an extended strike by the Writers Guild of America, which started on May 2, 2023, and media layoffs were bullish for Netflix.
“An extended writers strike would disrupt the back-to-school TV calendar, likely pushing more users/viewing to NFLX, given its programming lead-time. NFLX benefits from a deep backlog as well as international content that is unaffected by the strike,” analysts noted.
“Additionally, NFLX is likely benefiting from media job cuts, as competitors struggle amid ad market weakness and subscription services cash drain.”
Further, Oppenheimer’s analysts noted that Netflix continues to gain share of US streaming and TV viewership over the past two years, despite several new entrants into streaming.
“In the quarter to date, NFLX represents 7.4%/2.6% of US streaming/US TV viewership versus 7%/2.3% last year and 7.4%/2.5% in 1Q23,” they wrote.
As such, the analysts increased their price target on the stock to $500 with an ‘Outperform’ rating. Netflix shares are currently trading at US$432.
The analysts wrote that while their price target calculation of 25 times their 2025 earnings per share (EPS) estimate for Netflix was on the high end of its peers, “we believe it is warranted for the leading global digital media company with a multi-year growth runway.”
“Furthermore, when looking at the ‘trillion-dollar club’ (Amazon, NVIDIA, Microsoft, Apple, and Google’s parent company Alphabet) our $500 target is still a 9% discount to peers,” they added.
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