Oppenheimer has maintained its Outperform rating on Netflix stock despite recent concerns about the streamer’s ability to successfully implement its new initiatives. This analyst believes that a dip in Netflix’s (NASDAQ:NFLX) stock presents an opportunity for investors.
According to analyst Jason Helfstein, the stock first traded higher than the market after the release of fourth-quarter results (+20% vs. the Nasdaq’s +11%). Still, it later fell by 22% compared to the Nasdaq’s fall of 7%.
This transpired in tandem with “worries regarding increased churn from mandating password sharing,” “slower ad launch,” and “Fed fears,” as Helfstein pointed out. Yet, “nothing has changed from our initial thesis: advertising grows the [total addressable market], content competition is reducing, and paid account sharing will be a long-term tailwind.”
According to him, the level of involvement in the first quarter is on track to be lower than in the preceding two quarters. Still, it is on par with the average for the last six quarters. Yet it seems that a crucial competitive danger may be diminishing, maybe because competitors are shifting their attention more and more toward profit: The management of Netflix alluded to a decreased churn rate, which contributed to the company’s excellent streaming net additions in the fourth quarter (7.6 million, which was greater than most competitors and only second to 9.9 million at Paramount+).
According to Helfstein, investors see the company’s crackdown on account sharing as a disadvantage. Still, it should provide considerable revenue upside in the long term: depending on the recapture rate, $2 billion to $8 billion, making up 6%-23% of Oppenheimer’s 2023 revenue projection.
The company established a price objective of $415 on Netflix stock for the next 12 to 18 months, indicating an upside potential of 39%.
According to recent reports, Netflix is mulling over several options for the advertising stack it uses, one of which may include performing more work in-house.
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