In early January 2022, when Netflix seemingly had no use for advertising and subscriber growth still seemed inevitable, the company’s stock price hovered in the $500-per-share range. Sure, it was down from when he’d briefly sniffed the $700 three months earlier, but there was no reason to panic.
Little did the public (and the media) know that the “Netflix Fix” – the streamer’s first loss of subscribers and projections of losing even more – was brewing. On Jan. 20, 2022, we got our first sense that trouble was brewing via a warning letter to shareholders: Netflix predicted it would add *only* 2.5 million subscribers that quarter.
It ended up losing 200,000 subscribers by the end of March. And then he lost nearly another million by the end of June. Suddenly, those same NFLX shares were trading for $200.
Since then, the once-invincible streamer has made a comeback with the launch of an ad-supported tier, vastly improved content, and a crackdown on password borrowers. Today Wall Street has rewarded his efforts, more or less.
Two separate media analysts, Doug Anmuth with JP Morgan and Steven Cahall with Wells Fargo, significantly raised their price targets for Netflix stock on Wednesday. JP Morgan raised its NFLX goal from $380 to $470; Wells Fargo went from $400 to $500.
Shares closed this afternoon 23 cents off Wells Fargo previouss price target The other $100 depends entirely on its potential.
The paid-sharing program that Netflix began rolling out last month in the US is the big deal: JP Morgan now estimates that of the 100 million people worldwide who Netflix says are mooching off someone else, 14 million will start doing so. the pony – either as an add-on or as new accounts, by the end of 2023. It will hit 26 million next year. By 2025, a third of freeloaders will be monetized.
Anmuth believes what he calls the “monetized borrowers” will end up “evenly split between new subscribers and extra members.” All in all, we’re talking about a couple billion dollars more in annual revenue over the next few years. Well, really, analysts are the ones talking about it. We, as investors, listen carefully.
In its note to clients (and obtained by IndieWire), Wells Fargo outlined ways Netflix can compete in an increasingly thorny advertising market. Netflix in May said it had around five million users in the advertising tier. With password sharing taking effect, a number of borrowers may choose to simply sign up for their own ad-supported account, which costs $1 a month less than having someone else bill you as an add-on. without ads.
If Netflix with ads can reach 20 million users, Wells Fargo predicts it would put them in Hulu’s ballpark in terms of ad impressions and dollars. And remember: This is just a secondary revenue stream.
To get there, Netflix will likely have to step up its live programming. He had success in the space with Chris Rock’s live stand-up comedy special and failure with the “Love Is Blind” reunion show. But if Amazon Prime Video can seamlessly stream live award shows and sports programming, there’s no reason Netflix can’t get there. Cahall pitched WWE’s “SmackDown” and/or NASCAR races as a start.
It’s a shortcut to subscriber growth that may come at a cost: those industry-high CPMSs (cost-per-thousand ad impressions).
“(Netflix) will need to acquire many more users to solve major advertisers’ problems, and through that process, it will almost certainly need to reduce ad prices to give advertisers the scale they need at prices they can afford,” he said. wrote Cahall.”We think that over time, Netflix will see its ad inventory sold across a range of price points, some of which are premium and some of which are not.”