Netflix's recent earnings report has impressed analysts, suggesting that the streaming giant is poised to generate more revenue from its members. In addition to curbing password sharing, the company is exploring opportunities in the advertising sector.
Netflix made a bold move during its third-quarter earnings announcement by revealing plans for further price increases. This news was warmly received by Wall Street, highlighting the company's potential for growth in various economic conditions.
Due to these positive developments, Patterson upgraded his rating on Netflix from Standard Weight to Overweight. He also set a target price of $510, based on a price-to-earnings multiple of 25 times Netflix's projected 2024 earnings.
In early morning trading on Thursday, Netflix shares soared by 15% to reach $398.70. Meanwhile, Walt Disney's stock experienced a modest 0.6% increase, and Paramount Global saw a gain of 1.1%.
Netflix's Profit-Boosting Initiatives
Netflix, the leading streaming service, has been exploring various strategies to boost its profits and maintain its market dominance. One of these strategies, known as 'paid sharing,' has gained significant traction. Additionally, Netflix has introduced advertising to its cheaper subscription plans, a move that its competitors have followed.
Ad-Supported Tier Driving Growth
Prioritizing User Base Expansion
To solidify its position in the market, Netflix has maintained the price freeze for its U.S. ad-supported tier. By doing so, the company aims to prioritize building its user base. UBS analyst John Hodulik believes that a combination of price increases and scaling ad revenue will drive continuous growth in average revenue per member by 2024. Consequently, Hodulik maintains a Buy rating on Netflix with a $500 target price.
Positive Reviews Boost Confidence
Even analysts who may be more cautious about the company's prospects are impressed by Netflix's performance. Macquarie analyst Tim Nollen, while maintaining a Neutral rating on Netflix, acknowledges that the company delivered a solid quarter and is showing gradual improvement. Nollen expects positive outcomes from the company's paid sharing efforts and its recently introduced ad-supported tier. He sets a target price of $410 for the stock.
In summary, Netflix's innovative initiatives, such as 'paid sharing' and the introduction of an ad-supported tier, are expected to contribute significantly to its revenue growth. Analysts are optimistic about the company's future and believe that Netflix will continue to benefit from rational competition in the streaming market.
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