Published - June 9th, 2023 @10:28 AM (CET)
JPMorgan Predicts 17% Netflix Upsurge
As indicated by JPMorgan, Netflix's (NASDAQ:NFLX) shares are poised for a potential 17% upswing, given the early triumph of the streaming giant's cost-effective advertising plan and paid sharing rollout. In 2023, Netflix's stock soared by 37%, and this uptick could endure, as proposed by JPMorgan, due to the firm's promising initiatives.
Revised Price Target Suggests Growth
JPMorgan reaffirmed its "Overweight" rating on Netflix's shares in a recent note, amplifying its price target from $380 to a hefty $470. This modification implies a 17% potential increase from the current share value. The global banking institution is optimistic about Netflix's prospects, particularly its strategy to monetize the estimated 100 million households accessing the platform through shared passwords without paying.
Lower Backlash on Paid Sharing Plan
Netflix's paid sharing plan, announced in February, initially faced consumer backlash, leading to a delay in its launch. However, the revised program, which encourages users to pay for shared access or urges unauthorised users to become subscribers, has seen a more subdued reaction. JPMorgan views this as an encouraging development, a testament to Netflix's improved communications strategies.
Shared Accounts to Become Paying Subscribers
JPMorgan analyst Doug Anmuth anticipates that 33 million password-sharing households will transition to paying customers by 2025. He predicts an evenly distributed increase in new subscribers and extra members, the latter category being households willing to pay a higher fee for password sharing.
Revenue and Profit Projections Rise
The success of the paid sharing initiative, coupled with the low-cost ad tier's substantial momentum, gives Anmuth the confidence to elevate his revenue forecasts by 4% and 6% for 2024 and 2025, respectively. Moreover, his operating income predictions have risen by 6% and 9% for the same periods. These high financial projections suggest an increase in Netflix's share price.
Further Growth Expected Post-Upfronts
Anmuth acknowledges the 17% rise in Netflix's shares since the Upfronts presentation. However, he asserts the potential for further growth as Netflix successfully implements paid sharing, and financial estimates continue to climb.
Netflix's Bullish Outlook
The remainder of Anmuth's bullish outlook on Netflix rests on anticipated profit margin expansion due to accelerated revenue growth and improved cost management. It also leans on the expected enhancement in the company's free cash flow, attributed to reduced content expenditure, and Netflix's dominant position in an increasingly rational streaming industry.
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