Netflix trades higher after BofA reiterates Buy rating
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Netflix (NASDAQ:NFLX) stock rose ~2% on Tuesday after BofA Securities reiterated its Buy rating on the shares.
The firm also raised its price target on the stock to $490 from $410.
BofA analysts said that last week, multiple third-party data firms suggested that Netflix's password sharing crackdown was tracking better than expectations. The analysts believe this will drive upward estimate revisions across the Street.
According to Antenna, after alerting subscribers that Netflix would curtail password sharing, the streaming service provider had the four single largest days of U.S. user acquisition in the four and a half years, the analysts noted.
Antenna has been tracking the data, the analysts said that if they assume just over 60% of password borrowers in the U.S. are converted, they estimate password sharing could represent a $2B incremental annualized revenue opportunity.
BofA analysts added that they see Netflix's crackdown on password sharing and the AVOD opportunity as linked.
The analysts remain bullish on Netflix's AVOD opportunity due to their â engagement which dwarfs competitors; reach across attractive demographic groups; experienced team which will scale the business and technology requirements; and healthy ad demand for AVOD along with their innovative offering.
The analysts said they were increasing their forecast to reflect better subscriber additions due to password sharing. They now forecast 18.7M net additions in CY23E (compared to 13.7M previously) and ~20M net adds in CY24 (versus 16M previously).
The firm noted that its raised its target multiple to reflect the improved growth prospects from password sharing. The analysts noted that supported by its world class brand, leading global subscriber base and position as an innovator they believe Netflix is poised to outperform.
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