This year has not been kind to Netflix (Netflix stock), which has struggled mightily. However, many Wall Street analysts are optimistic that a recovery will occur in 2023, and as a result, favorable ratings are accumulated on the company.
Overweight is the new recommendation analyst Steven Cahall of Wells Fargo has given Netflix shares. Previously, he had given it an equal weight rating. This was in response to J.P. Morgan, who had previously stated that they would maintain their Overweight ratings on the shares. Midway through November, the equity research analyst Jessica Reif Ehrlich at BofA Securities reactivated her coverage of the shares with a Buy recommendation. Currently, 21 of Netflix’s 45 analysts have a favorable outlook on the company’s stock, up from 15 around three months ago.
Cahall’s call on Netflix (NASDAQ:NFLX) comes when the stock has lost around 47% of its value this year, compared to the S&P 500’s fall of 17%. The company that provides streaming video reported decreases in members for the first two quarters of 2022. The level of competition is also increasing: Walt Disney (DIS) On Thursday, Disney+ began offering a streaming tier that is funded by advertisements and costs $7.99 per month, positioning itself as a competitor to Netflix’s basic ad-supported plan, which began offering its services in November for $6.99 per month.
When analysts believe that a stock is trading at a price significantly below its actual value or when shares of the company have experienced a significant price decline, and the analysts believe that investors are overlooking a favorable tailwind, they will frequently upgrade or reiterate a Buy rating for the stock. Netflix may have brighter days ahead, according to BofA, J.P. Morgan, and Wells Fargo. This may be due to the ad-supported streaming service being a winner in the coming years, or it may be due to an improvement in the service’s content.
According to Cahall, “all the ingredients were in place for a more challenging NFLX performance in 2022.” However, “when we look at the mosaic as a whole, we see room for the key performance measures to exceed in 2023.”
As year-end material begins to be released, the monthly active user figures reported by Wells Fargo for November indicated a gain of 6%. The highly anticipated third season of the critically acclaimed program Emily in Paris will premiere on December 21, while the second season of Alice in Borderland and Roald Dahl’s Matilda the Musical will also become available on Netflix in the final few days of December.
The Company’s Plan to Raise the Netflix Stock Price
Additionally, Cahall expects that the ad-supported service will raise the global subscriber count by approximately 23 million by 2025, bringing the total to 279 million when it was previously expected to be 256 million. According to the analyst, “We don’t see how [advertising-based video on demand] isn’t anything other than incremental to subscribers.”
According to Ehrlich of BofA, the Gen-Z age group will find the advertisement appealing. Gen-Zers often have less discretionary spending and have severed their ties to traditional television. Doug Anmuth of J.P. Morgan cited initial data from Apptopia that suggested global downloads of the app rebounded after the launch of the ad service; Netflix reported a 16% year-over-year loss in November as opposed to October’s 30% reduction in downloads.
Despite this, there are many grounds to have skepticism. Consumers are feeling the sting of inflation in their wallets. Although the service supported by advertisements costs less, it is too soon to tell if this will significantly boost the average revenue per user. Some participants in the market are concerned that higher-paying U.S. users, who currently have monthly payments of $16 or $20, would downgrade to the less expensive ad-supported option. This could result in a drop in revenue, one that the cash generated by advertisements and new subscribers might not be able to compensate for. The global average monthly income per paying membership was $11.85 for the three months that ended on September 30.
Netflix did not immediately react to a request for comment; however, on its most recent earnings call in October, the firm stated that it usually does not see a lot of customers switching between its existing set of plans.
Featured Image- Unsplash @ freestocks
Author Valerie Remorosa 
