June 5, 2023 4:53 pm

Netflix’s (NFLX) controversial password sharing crackdown hit US customers on Tuesday, and analysts stay bullish on the initiative’s capacity to add incremental income development for the business.

CFRA analyst Ken Leon told Yahoo Finance the password sharing crackdown will transition Netflix into “a stronger business enterprise,” adding, “it is an chance to truly construct the business enterprise to a additional loyal subscriber base.”

Netflix stock rose instantly following Tuesday’s announcement ahead of sinking two%. Shares recovered on Wednesday with the stock closing the day up about two.five%. Shares had been down a modest 1% on Thursday.

Leon, who has a Robust Obtain rating on the stock and a $390 value target, stated it is probably investors will see a couple of choppy quarters ahead but that Netflix should really be in a stronger position by Q4 and set itself up “pretty nicely for 2024.”

When asked if he’s concerned about churn, Leon stated, “You cannot truly have churn for a person who’s not paying a subscription.”

In its quarterly shareholder letter final month, Netflix stated the business anticipated brief-term churn ahead of customers signed up for their personal accounts: “In Canada, which we think is a trustworthy predictor for the US, our paid membership base is now bigger than prior to the launch of paid sharing and income development has accelerated and is now increasing quicker than in the U.S.”

Netflix’s controversial password sharing crackdown hit US customers on Tuesday — but analysts stay bullish on the initiative’s capacity to add incremental income development.

Shortly following the announcement, Oppenheimer reiterated its Outperform rating and raised its value target on the stock to $450 a share, up from the prior $415.

The move represents roughly 25% upside compared to present levels with the firm citing “several tailwinds, which includes decreased competitors, lengthy term unwind of linear Television, and the launch of marketing &amp password sharing.”

Oppenheimer, which performed a survey of almost two,000 US Netflix customers, wrote in its note to clientele that the survey’s final results indicate the prospective for the streamer to add about 36 million new subscribers.

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Practically half of the respondents indicated they’d be prepared to spend the $7.99 charge for remote customers though 70% stated they’d be open to signing up for the $six.99 ad-tier program.

“With pricing above ad-tier, our survey suggests a substantial portion of these customers will be pushed towards marketing,” Oppenheimer analyst Jason Helfstein wrote. “We think accurate advantages from password sharing &amp marketing tier is not adequately factored into estimates.”

Alexandra Canal is a Senior Reporter at Yahoo Finance. Stick to her on Twitter @allie_canal, LinkedIn, and e-mail her at alexandra.canal@yahoofinance.com

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