Netflix (NASDAQ:NFLX) added 1.75 million paid subscribers in Q1 and reported mixed financial results. While its earnings surpassed Street’s forecast, revenues fell short. Besides for earnings, investors should note that the streaming giant pushed the broad rollout of its crackdown on password sharing into Q2, which means the benefits of this move could be realized in Q3.
The company admitted that the rollout of paid sharing has been slow (it initially planned for a broader Q1 launch). Now the company is preparing for a wide rollout across all of its geographies, including the US, in Q2.
The shift indicates that the membership growth and revenue benefit arising from the paid sharing launch will now fall in Q3 rather than Q2. NFLX highlighted that its per-member advertising economics remain healthy, particularly in the US. Moreover, it expects the unit economics to improve further.
Today, Goldman Sachs analyst Eric Sheridan stated in his report that the recent rise in NFLX stock reflects the benefits of the company’s initiatives to increase subscribers and margins through a paid sharing launch and an ad-based subscription tier.
Netflix stock has gained more than 36% in six months. Sheridan said, “We see a lot of the forward operating momentum already priced into Netflix shares which now trade at an EV/FCF (ex-SBC) of 42x on our 2023 estimates.”
The analyst recommends a Sell on NFLX stock with a price target of $230.
Meanwhile, Netflix announced in a blog post that it is winding down DVD.com, its DVD-by-mail rental service. The business, which was started about 25 years ago, continued to struggle amid the rise of video streaming services. NFLX will ship its final discs on September 29, 2023.
What’s the Prediction for NFLX Stock?
NFLX is in a transitional phase with a focus on driving its paid member base and expanding margins, which keep analysts cautiously optimistic about its stock.
NFLX stock has received 16 Buy, 16 Hold, and two Sell recommendations for a Moderate Buy consensus rating. These analysts’ average price target of $360.28 reflects 7.97% upside potential.
