Netflix investors ‘too pessimistic’ about crackdown on password sharing: analyst

Netflix (NFLX) controversial Crackdown on sharing passwordswhich has angered users and concerned investors, may not be such a bad thing after all, according to at least one media analyst.

“The company has been dealing with this for years. They intentionally made Netflix the easiest service to share and built tremendous loyalty by watching and the shows they have,” Jason Helfstein, chief executive and head of internet research at Oppenheimer & Co., told Yahoo Finance Live on Wednesday in an interview.

“So we just think investors are too pessimistic about how this is going to play out,” he said, estimating that the crackdown on password sharing could generate $2 billion to $8 billion in additional revenue this year could bring.

In his Quarterly letter to shareholders Released in January, Netflix said it would ramp up its push to combat password sharing in the first quarter, though the streamer didn’t provide details on exactly when that would happen and which countries would be affected.

Since then, Netflix has expanded its approach to countries like Canada, New Zealand, Portugal and Spain, in addition to test countries Chile, Costa Rica and Peru. So far there has been no announcement regarding US users.

Signage at the Netflix booth is seen on the convention floor of Comic-Con International in San Diego, California, United States, 21 July 2022. REUTERS/Bing Guan

The password crackdown may have forced Netflix to cut prices overseas, a strong concern for investors as shares are down 7% since announcing the price cut on Feb. 23.

“We believe such dramatic price cuts have confused the streets in so many markets,” Citi analyst Jason Bazinet wrote in a new note to customers Thursday, suggesting the price cuts reflect upcoming “global enforcement of password sharing.” .

The company slashed prices by 50% in about 100 overseas markets, including Yemen, Jordan, Iran, Kenya, Croatia, Venezuela and Indonesia, among others. According to a study by Citi, that’s about 6% of the subscriber base.

“The Netflix story will remain a little complex as investors bicker with the new ad tier And while enforcing password sharing,” added Bazinet.

Still, the Netflix password crackdown and its recently launched ad-supported tier were seen as significant drivers of profitability, especially as competition in the streaming space escalates.

Helfstein, who has an Outperform rating on the stock and a current price target of $415 per share, warned that while Netflix’s ad tier is still in its infancy, the company has tools to improve the overall advertising experience for consumers to improve.

“Netflix should be able to have highly targeted ads. There’s a lot of data to suggest that as long as the ads are targeted and relevant, consumers don’t hate them,” he said. “Most consumers will pay the extra $3 if they really find the ads annoying.”

Since Netflix launched its ad tier in the U.S. on Nov. 3, shares are up about 13%, outpacing the Nasdaq’s 9% gain over the same period. The stock is up about 5% year-to-date.

With additional reporting from Brian Soci

Alexandra channel is Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at

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