• Increasing numbers of subscribers are the lynchpin
• Fundamental factors also speak in favor of Netflix
• Netflix is ahead of the competition
Although the Netflix share has still had to cope with losses of 54.68 percent since the beginning of the year, the losses have been limited somewhat overall with a plus of 36.83 percent in the last 6 months. It is currently trading at $273.00 (close on 11/02/2022).
The company’s balance sheet for the third quarter of 2022 was significantly better than expected: Netflix generated earnings per share of $3.10 and expected EBIT of $2.14. Compared to the same quarter last year, earnings per share fell slightly (previously $3.19), but the streaming giant was able to increase its sales to $7.93 billion. In the same quarter last year, 7.48 billion US dollars were implemented, the analysts had calculated 7.84 billion US dollars for the past quarter. After the figures were published, the stock rose sharply, at times jumping 25 percent.
The balance sheet and new fundamental factors also prompted Pivotal Research analyst Jeff Wlodarczak, known as the Netflix bear, to upgrade the stock. “We have clearly held our sell rating for too long and believe the stocks are likely to continue to rise following the gains,” he wrote, according to investing.com. Wlodarczak justified the buy recommendation and the upgrade of the share price target from 200 to 375 US dollars primarily with a combination of rising profits and expected subscriber growth. Other analysts too, such as Deutsche Bank
Credit Suisse or JPMorgan have upgraded Netflix stock to “buy”.
Subscriber growth central to the rating
The expected growth in subscribers is central to Jeff Wlodarczak’s optimistic forecast. He raised the forecast in 2023 from 5.5 million to 15 million net subscribers (the consensus is 12.5 million). The Pivotal analyst is certain that Netflix will continue to pursue its goal against account sharing, i.e. the sharing of passwords, and turn previous beneficiaries into paying subscribers.
In principle, sharing a Netflix access among several users is permitted and also provided for in the terms and conditions of the streaming provider, depending on the subscription variant (Basic, Standard or Premium) – however, the users must belong to the same household. How exactly the planned review of subscribers is to be implemented has not yet been made public by Netflix – music provider Spotify, for example, is said to be doing random checks. According to TECHBOOK, people outside of your own household could also be included in the Netflix subscription for an extra fee; Furthermore, Netflix is working on a function that allows users to track account sharing.
Netflix in the industry environment
A further jump in profits given the advertising-financed network is in the air, but the subscriber churn will arrive with a delay and only become noticeable in the second half of 2023, predicts Jeff Wlodarczak.
Given the sharp slowdown in digital advertising, Netflix could become an attractive partner for investors. Because: “As competition increases, Netflix still offers the world’s most unique and powerful streaming experience with a reasonable path to accelerate subscriber growth over at least the next year,” the analyst wrote. Finally, competitors, including Apple, have also increased their prices, which is positive for Netflix.
The new “Netflix bull” Wlodarczak also suspects that a sale of the streaming giant could be imminent: “We continue to believe that CEO Reed Hastings will sell Netflix (most likely to Microsoft) as early as 2024 (with regulatory approval in 2025 under a possible new government),” said the analyst.
Editorial office finanzen.net
Leverage must be between 2 and 20
No data
More news about Credit Suisse (CS)
Image sources: Netflix, jejim / Shutterstock.com