Netflix could see sales challenged with new ad-supported option
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Netflix (NASDAQ:NFLX) shares rose almost 5%, Thursday, even as Bank of America Securities analyst Nat Schindler cut his price target on the company's stock due to concerns about the streaming TV giant's plans to roll out an ad-supported version of its service.
Schindler took down his price target on Netflix (NFLX) to $240 a share from $300 on the grounds that a subscription option supported by advertisements "presents some damaging prospects" to the company's revenue stream. Schindler left his underperform rating on Netflix (NFLX).
According to Schindler, Netflix (NFLX) could help address some of the middle- and lower-income "bands" that are less willing to pay upwards of $15 a month by offering a less-expense streaming alternative.
However, Schindler said that such a prospect could lead to a Netflix (NFLX) seeing a revenue hit, lower-income customers in developing markets, in particular opt to switch from their current subscriptions to the lower-price ad-supported service.
Netflix (NFLX) broached the topic of offering a streaming option with ads during the company's disappointing first-quarter earnings results. On Tuesday, a report from The New York Times cited an internal Netflix (NFLX) memo that said the company could introduced advertising to its service as early as the fourth quarter of this year.