Netflix gets boost as Oppenheimer raises optimism for revenue streams
Wachiwit
Netflix (NASDAQ:NFLX) is a top gainer in Communications stocks Wednesday, up 3.8% in the afternoon, as Oppenheimer notes some increased optimism around potential for increased revenue in the company's latest initiatives.
That includes some now-popular enthusiasm around uptake of Netflix's (NFLX) Paid Sharing project -- otherwise known as its crackdown on password sharing by offering households extra memberships at a discount for their nonresident friends and family.
But it also taps into new upsell speculation resulting from the company's quiet removal of its lower-priced Basic plan in Canada, and guesses about whether Netflix would copy such a move in its fellow U.S. home market.
As in most markets, in Canada Netflix recently offered three traditional subscription tiers (at C$9.99, C$16.49 and C$20.99 per month) along with a low-end ad-supported service tier at C$5.99 per month. Now it's stopped offering the C$9.99 Basic Plan to new subscribers, though existing members can keep it as long as they stay active.
And while Netflix (NFLX) still offers the Basic plan (limited to one concurrent ad-free stream at a 720p resolution) in the United States, it hides it from its main pricing page; it shows the ad-free and top two service tiers, and visitors need to click "see all plans" to expose the fact that the Basic plan is still available.
Cutting the Basic plan elsewhere in the world is the "obvious next step," analyst Jason Helfstein said -- unlocking $4.4B in annual revenue, or 13% of the estimated 2023 total.
"While we expect a gradual rollout by geography into next year, we think investors can start to discount the additional revenue today," he said, boosting his price target to $500 (an implied 16% upside).
Meanwhile, Netflix (NFLX) is continuing to gain share, he argues, and there's even potential tailwinds from an extended Hollywood writer strike and recent media layoffs.
"Extended writers strike would disrupt back-to-school TV calendar, likely pushing more users/viewing to NFLX, given it's programming lead-time," he said. "NFLX benefits from a deep backlog as well as int'l content that is unaffected by strike. Additionally, NFLX is likely benefiting from media job cuts, as competitors struggle amid ad market weakness and subscription services cash drain."
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