Thursday, February 29, 2024

Netflix Password-Sharing Crackdown Seen Driving Subscriber Boost

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Despite grumbling by Netflix subscribers who share their accounts with family and friends outside of their home, Netflix’s crackdown on password sharing is likely to boost its subscriber count, an analyst says. Netflix (NFLX) stock rose Friday.


In a note to clients Friday, BofA Securities analyst Jessica Reif Ehrlich said data from Canada bodes well for Netflix’s efforts to convert freeloaders into paying subscribers.

Netflix has rolled out its paid-sharing program in select international markets, including Canada, New Zealand, Spain and Portugal. It has not launched the program yet in the U.S.

“The indication of much stronger-than-anticipated subscriber data in Canada is an encouraging sign that Netflix’s recent crackdown on password sharing is driving new subscribers to the service,” Reif Ehrlich said.

She added, “In addition to initially positive results from Canada, this is a good sign for upcoming launches in other countries.”

Netflix Stock Climbs Higher

Reif Ehrlich reiterated her buy rating on Netflix stock with a price target of 410.

On the stock market today, Netflix stock rose 2.5% to close at 328.39.

According to IBD MarketSmith charts, Netflix stock is in a consolidation pattern with a buy point of 379.53. In a positive sign, it is attempting to retake its 50-day moving average line. Also, Netflix stock fell below that key support level on Feb. 23.

On Thursday, Netflix stock jumped 9% to close at 320.37 amid reports that the streaming video leader’s ad-supported service is gaining traction.

‘Enormous, Long-Term Opportunity’

Netflix estimates that 100 million people worldwide are using its internet television service without paying for it due to password sharing. That includes 30 million in the U.S. and Canada. Netflix ended 2022 with 230.75 million total subscribers, with 32% of those in the U.S. and Canada.

“Given the strong level of engagement on Netflix’s service, we believe they are particularly well-positioned to convert a significant percentage of these lost subscribers,” Reif Ehrlich said. Netflix can capture those nonpaying users either through a new subscription or an upcharge to sharing households.

She called the password-sharing crackdown “an enormous long-term opportunity, with sizable upside realized in 2023/2024.”

Netflix stock ranks first out of 21 stocks in IBD’s Leisure-Movies & Related industry group, according to IBD Stock Checkup. Further, it has an IBD Composite Rating of 94 out of 99.

IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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