It appears that the actors’ union’s strike has finally come to an end. Following a 118-day labor dispute, the Screen Actors Guild (SAG-AFTRA) announced last week that they had reached a tentative agreement with Hollywood studio executives. This marks the conclusion of the walkout that began on July 14th and paves the way for the resumption of TV and film production. Actors will not only be able to return to actual TV and film production but will also once again be eligible to participate in promotional activities.
This is good news for Netflix (NASDAQ:NFLX), says TD Cowen analyst John Blackledge. “We view the end of the strike as a clear positive for Netflix, as we think the timing allows for the 2024 film & TV content slate to largely roll out as expected,” the 5-star analyst said. “We’ve heard from executives at multiple studios (including during our August ’23 Bus Tour) that if the strike were not resolved by around year end, 2024 slates could be significantly disrupted. The resolution removes that headwind, in our view.”
In a broader sense, the conclusion of the strike is advantageous as it guarantees a steady stream of fresh shows and films to “keep members engaged.” The resumption of actor marketing and promotion is expected to raise awareness, enhancing the probability fans will engage with their favorite stars and be prompted to watch the latest shows and movies.
Netflix has noted that historically member retention corelates closely with engagement. Up until now, the streaming giant has managed to shield itself from the impacts of the strike due to the time gap between production and the release of shows. However, any disruptions would have become more noticeable if the strike had persisted into 2024, potentially causing delays in the production and rollout of its content.
In one way, similar to the pandemic era, Netflix already stands to gain from the strike, having cited it will see a ~$1 billion benefit from reduced cash content spend amid the WGA (writers’ guild) and SAG-AFTRA strikes (the WGA strike finished on Sep 27).
Blackledge also highlights the fact the strikes centered on the United States, meaning they essentially had no bearing on Netflix’s international production activities. “We considered this a key advantage for NFLX relative to peers,” says Blackledge, “since we view Netflix as the most international of the major US-based streaming services given its geo split of revenue as well as its multi-year effort to build out a robust local language slate across its broad footprint of countries.”
All told, Blackledge reiterated an Outperform (i.e., Buy) rating on Netflix shares along with a $500 price target, suggesting the shares will move 11% higher over the coming months. (To watch Blackledge’s track record, click here)
Elsewhere on the Street, the stock claims an additional 22 Buys, 10 Holds and 1 Sell, all for a Moderate Buy consensus rating. Going by the $465.97 average target, the stock has room for only modest returns of 3% in the year ahead. (See Netflix stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
