A study by data analytics and brand consulting firm Kantar showed that Netflix (NASDAQ:NFLX) lost one million users in Spain. The decline reflects the video streaming giant’s clampdown on password sharing. While a short-term churn was expected due to the crackdown, the number appears to be alarming.
Netflix added 1.75 million paid users in Q1 and is pushing for a broad rollout of its crackdown on password sharing.
The move is likely to boost its high-quality paid membership base and support revenue and margins. However, this could lead to volatility in its subscriber base in the short term.
Following the release of Q1 earnings, Goldman Sachs analyst Eric Sheridan expects that crackdowns on password sharing in additional markets could lead to “pronounced subscriber volatility over the next 6 months.” Nonetheless, Sheridan believes that NFLX’s move to drive high-quality subscribers via its paid sharing plans and ad-based subscription tier could bring in high-margin revenues and cash flows.
While Netflix focuses on high-quality users, the company must bring lost users back to its platform under the paid subscription model. Will Netflix successfully come out of this high churn phase? That remains a wait-and-watch story. Meanwhile, let’s look at what Wall Street suggests for the stock.
What’s the Prediction for Netflix Stock?
Sheridan sees the company’s move to drive high-margin revenues as positive. However, given the recent up-move in NFLX stock, the analysts believe that “a lot of the forward operating momentum already priced into Netflix share.”
Sheridan recommends a Sell on NFLX stock. Overall, Netflix stock received 17 Buy, 13, Hold, and two Sell recommendations for a Moderate Buy consensus rating. Analysts’ average price target of $367.52 implies 12.79% upside potential.
