Shares of Netflix (NASDAQ: NFLX) are far off from their 2021 highs with the stock currently hovering near its 52-week low of $162.71, and has cratered 68.8% year-to-date. The stock of the streaming giant closed at $186.51 on Monday, May 16.
It seems like investors have not been reassured from the company’s recent steps to shore up subscriber losses. This includes Netflix’s plans to crack down on password-sharing households and exploring an ad-supported subscription plan. A recent Deadline report stated that the company is also getting ready to launch live streaming of events.
Wedbush analyst Michael Pachter put forth his views on Netflix’s recent moves to address subscriber losses. When it comes to password sharing, NFLX rolled out a plan in March in countries like Chile, Peru, and Costa Rica that would enable households to add an extra member to their existing plans or transfer their membership profiles to a new account for a small charge.
Pachter believes that “Netflix is unlikely to win more than a few million new customers by changing its practice.” However, the analyst is more upbeat about the company’s plan to adopt an ad-supported version of NFLX for lower-priced subscription tiers.
The analyst thinks that this ad-supported plan could be a significant potential revenue driver for Netflix and could also “cannibalize existing customers” and reduce churn. Pachter thinks that another move that Netflix could make to decrease churn is staggered release dates for its content.
The company is moving towards it by staggering the release of content like Ozark and Stranger Things. Pachter thinks that “this experiment will be a resounding success if expanded to all Netflix originals, and we believe the company will ultimately move in that direction.”
The analyst thinks that by raising the prices of its subscription plans in mature markets like the United States, the company’s average revenue per user (ARPU) and profitability, both could go up.
Considering the potential growth drivers for the stock, Pachter upgraded the stock from a Hold to a Buy and kept the price target of $280 for the stock. Considering that Netflix’s stock price has been below $200 for some time now, Pachter’s price target offers 50.1% upside potential at current levels.
Wall Street’s Take
However, Wall Street analysts do not share Pachter’s view and are sidelined about the stock with a Hold consensus rating based on eight Buys, 28 Holds and three Sells. The average NFLX stock forecast is $299.93, implying 60.8% upside potential from levels seen before market open on Tuesday.
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