Netflix shares were soaring 6 percent in mid-day trading Thursday after an analyst reversed his position and upgraded the stock to buy from sell based on its new initiatives.
CFRA analyst Kenneth Leon sees Netflix’s new advertising tier, which he expects to both bring in more users as well as the addition of advertisers, as well as its crackdown on account sharing as revenue catalysts for the stock. Leon raised his price target to $310 from $85.
Netflix launched its advertising tier on Nov. 3, at a lower price of $6.99 a month. The streamer has already begun taking measures to limit account sharing, by allowing users to move their profiles to new membership accounts, and The Wall Street Journal reported Dec. 21 that a password crackdown will come in earnest in 2023.
On the content side, Leon said he also sees several new releases, including Emily in Paris, Glass Onion and Blood Origin, contributing to subscriber retention. Glass Onion, which premiered on the platform on Dec. 23, streamed 82.1 million hours in the first three days, marking Netflix’s sixth biggest film debut.
Amid conversations about the need for streamers to add live sports to draw in users, and the recent battle among streamers for NFL’s Sunday Ticket package, Netflix management has continued to hold to the line that the economics of acquiring sports rights don’t make financial sense for the streamer. This is the right tactic, according to Leon.
“We agree that NFLX does not need a major sports event or sponsor, which risks a big loss leader. We think it will be difficult for competitors to catch NFLX, one of the few profitable streaming providers with global scale,” Leon wrote.
Shares of Netflix have fallen 8 percent in the past month, after gaining 22 percent in the past three months. Disney’s stock was on the rise Thursday too, up 4 percent in midday, after a weeklong decline and after closing at an eight-year low Wednesday.
