Netflix's ad sales potential gets upbeat new look from Macquarie
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Netflix's (NASDAQ:NFLX) opportunity for new revenue gains from its upcoming ad-supported subscription option led Macquarie analyst Timothy Nollen to take a slightly more upbeat few of the streaming TV giant on Wednesday.
Nollen lifted his rating on Netflix's (NFLX) stock to neutral from outperform on the grounds that the company "can generate as much as $3.6B" in advertising revenue from its U.S. and Canada market in 2025. Nollen said that figure may seem large as Netflix is starting from a base of no advertising that it has maintained for more than a decade.
However, Nollen said that "assuming a lower subscription prices for the service, and the assumption that a third of all users migrate to this ad tier," the boost in revenue is reasonable.
Nollen admitted that his assumptions "look aggressive", but they "demonstrate both the ad opportunity" and corresponding offset to Netflix's (NFLX) average revenue per user.
In addition to his upgrade, Nollen raised his price target on Netflix's (NFLX) stock to $230 a share from $170.
Netflix (NFLX) shares edged up by 1% early Wednesday.
Netflix (NFLX) has said its ad-supported subscription option will launch in some form later this year. Last week, Netflix (NFLX) brought on former Snap (SNAP) advertising executives Jeremi Gorman and Peter Naylor to lead its ad-business efforts.