The shares of Netflix Inc (NASDAQ:NFLX) completed Monday’s trading session higher, up around 1.5%, after the company received another upgrade on Wall Street.
Netflix Inc Stock Performance
Earlier in the day, Oppenheimer raised the stock of the dominant streaming service to an Outperform rating, citing increased opportunity and higher engagement in the advertising market.
According to a recent note from Jason Helfstein, “Netflix is in a unique position to massive aggregate audiences and manage the timing of series releases for top-tier advertisers, commanding high [cost per thousand views].
Helfstein’s current share price goal is $325, representing a 33% increase over the stock’s current price. By 2025, he projects that Netflix Inc (NASDAQ:NFLX) will generate $4.6 billion in advertising revenue, bringing its total revenue with 282 million users to $42.4 billion.
The analyst warned that one potential downside risk might be more users switching to the new ad tier instead of moving down. Citing a recent Oppenheimer survey, he said on Yahoo Finance Live that only approximately 70% of people would change subscription plans.
Helfstein nevertheless emphasized the long-term advantages of an ad tier.
He credited Netflix’s position in the market and the range of service offers. He said, “If you think about what Netflix can do, they can time the shows in the best interest of their advertisers… this is pretty unique in the scope of advertising, which is a pretty mature industry.”
According to Wall Street Journal, executives at Netflix Inc (NASDAQ: NFLX) and its advertising partner Microsoft (MSFT) met with ad buyers recently. Netflix anticipated that its ad-supported tier would reach 40 million viewers by the end of next year.
A Netflix representative said at the time that “no decisions have been taken” and that it was still in the early stages to introduce a cheaper, ad-supported tier. “So, at this point, everything is simply conjecture,”
Platforms are more receptive to experimenting with different distribution and pricing structures as competition in the streaming market increases. Wall Street looks beyond subscriber figures to diversify audiences and counteract slowing growth.
The most recent outlets to join the ad-tier bandwagon are Netflix and Disney (DIS), with the latter planning to introduce its adoption on December 8.
Recent messaging suggested that Netflix Inc (NASDAQ: NFLX) may bring up the debut to November 1 to beat Disney’s December deadline. Still, the business also announced two senior hires in its attempts to introduce an ad-supported tier next year.
Investors should anticipate some growing pains when you launch this, Helfstein said, noting that he expects the streaming behemoth to cope with substantial problems at the beginning of the rollout.
According to Bloomberg, the ad-supported version will cost between $7 and $9 a month, and the company intends to play four minutes of advertisements for every hour of content.
According to a previous WSJ story, Netflix Inc is planning to charge advertising about $65 for reaching 1,000 users (a measurement known as CPM or “cost per thousand”). That fee is much greater than most of the other streaming competitors.
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