Netflix Inc (NASDAQ:NFLX) quarterly earnings were well received by analysts, who said subscriber growth was stronger than expected, indicating that the 'paid sharing' initiative is driving more subscriber growth than the market was expecting.
Alongside the video streaming group's third-quarter earnings report, which showed paid subs and earnings ahead of Wall Street expectations, management indicated call that the roll-out of the password sharing crackdown has been positive for revenue in every region and cancel reaction has been low.
UBS analysts said they believe paid sharing is being enforced in phases and tailwinds will continue for a while yet, noting that the uplift has been more to subscribers than average revenue per membership (ARM) to date.
Deutsche Bank analysts said: "Management also finally addressed the question of how long they expect to realize a benefit to subscriber growth from paid sharing enforcement; the answer being 'several more quarters'."
Those at Wedbush added that they think Netflix "is well-positioned in this murky environment as streamers are shifting strategy, and should be valued as an immensely profitable, slow-growth company".
The company also announced price increases for its basic and premium plans of $2-3 in the US. Prices are also set to rise in the UK and France.
"While more targeted in nature, we still see strong pricing power for Netflix into next year, especially as peers focus on profits, increase rates and cut spend," said the UBS team.
Netflix management also indicated more work needs to be done in scaling up the ad business, they noted, believing the long-term opportunity is to gain around 8% of the US market.
While ads are not yet directly accretive to earnings, Wedbush predicted they will be accretive by next year and said the ad-supported tier "should continue to reduce churn and draw new subscribers to the service".
The Swiss bank sees Netflix as "the main beneficiary of rationalizing competition" in the direct-to-consumer trend in video.
"This shift will include reductions in content spend, less local content creation, market exits, increases in prices and more content licensing from third parties - all supporting Netflix's ability to drive subs and pricing while keeping a lid on content costs (mgmt suggested business is nowhere near margin ceiling)."