Netflix Inc (NASDAQ:NFLX)
An analyst from Oppenheimer believes that the fact that Netflix stock has lost some of its momentum from earlier in the year is the ideal chance to purchase the company’s shares.
Netflix stock (NASDAQ:NFLX) increased by 1.4% so far this year, surpassing the performance of the S&P 500, which has increased by 0.2% over the same time period. Nonetheless, this represents a 19% drop from the stock’s highs reached in January.
Because investors are concerned about the state of the economy and the future of the financial sector, the stock market has taken a beating this week following the announcement that Silicon Valley Bank will be closing its doors. Oppenheimer analyst Jason Helfstein is optimistic about the future of Netflix despite these issues, and he believes that the recent dip in the share price of Netflix presents an excellent opportunity for investors to make purchases.
Following the release of the results for the fourth quarter, the stock initially increased in value before beginning a downward trend “on fears regarding higher churn from enforced password sharing, slower ad launch, and Fed fears,” according to Helfstein.
Factors Contributing to the Decline
The drop in the price of Netflix’s stock might be attributed to a number of different things. Rising levels of competitiveness in the streaming business are one of the most important factors. The introduction of new competitors like Disney+, HBO Max, and Peacock has made the competition more intense, as each platform is now striving for a portion of the market to call its own.
The slowing development of the company’s subscriber base is another issue that is contributing to the drop in the price of Netflix’s shares. The fact that the company still has a significant subscriber base despite the fact that its growth has slowed in recent quarters has led some investors to question whether or not the company’s most successful days are in the past.
Netflix has plans to implement stricter policies regarding the sharing of passwords in order to encourage customers from several households to sign up for their own individual accounts rather than sharing one. This is an effort to boost revenue, but it is yet unclear whether or not this will irritate users, which could cause them to go to competing streaming services.
For a number of years, Netflix has had a permissive policy against the sharing of passwords. Netflix once said on Twitter that “love is sharing a password,” and the company’s founder, Reed Hastings, stated in 2016 that he enjoys it when people share Netflix with one another. After suffering its steepest drop in subscriber numbers in a decade, Netflix began experimenting with different ways to “monetize account sharing” in the previous year. In addition to the expenses associated with password-sharing, Netflix has also introduced cheaper subscriptions that are financed by advertising. The company does this in the hopes of enticing more individuals to pay for Netflix by lowering the amount that they have to pay on a monthly basis.
Because of Netflix’s preeminence in the streaming video market and years of consistent increase in the number of subscribers, practically all of Hollywood’s big media corporations have started investing billions of dollars in their own streaming operations in response to Netflix’s success. The so-called “streaming wars” have resulted in the launch of a number of new streaming services, the most notable of which are Apple TV Plus, Disney Plus, HBO Max, Peacock, and Paramount Plus. The proliferation of streaming options has complicated the process of determining how many different services you need to use (and, frequently, pay for) in order to watch your preferred television episodes and movies online.
Now that the company is facing increased pressure from the growing number of competitors, it is pursuing initiatives that it has ignored for years, including a crackdown on account-sharing.
Helfstein is optimistic about the forthcoming crackdown on password sharing.
In a research note, Helfstein wrote that “We believe that nothing has changed from our original thesis: advertising increases the total addressable market, content competition is easing, and paid account sharing will be a long-term tailwind.” “We believe that nothing has changed from our original thesis.”
He did not change his rating on the company to anything other than Outperform and his price target remained at $415. Helfstein believes that there is the potential for an increase in revenue of between $2 billion and $8 billion as a result of the successful crackdown on account sharing.
On Wednesday, Netflix stock increased by 1.8%, reaching $300.31 per share.
The fall in the price of Netflix shares is a source of anxiety for investors, but it is not always an indicator of the long-term prospects of the company. The streaming market is still expanding, which means that Netflix has a lot of room to continue to broaden the kind of content it provides and to attract new users. If the company intends to keep its position as the leader in the sector, it will have to face the obstacles posed by an increase in the level of competition as well as a slowdown in the development of the number of subscribers.
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