Netflix Stock Prices Growth By New Move Password Sharing Block

Trading News - As the streaming landscape becomes increasingly crowded, Netflix (NFLX 0.36%) remains a formidable player in the arena, pioneering bold strategies to not only survive but thrive amidst fierce competition.Stock prices of Netflix are a testament to the company's innovative measures, one of which is the controversial crackdown on password sharing.

In an industry once monopolized by Netflix, the emergence of other robust platforms such as Disney, Alphabet, and niche players like Fubo, has spurred Netflix to invest aggressively in original content to maintain its lead. These calculated moves have resulted in tangible benefits, with the stock prices of Netflix reflecting a promising upward trajectory.

In the past few quarters, Netflix executives have hinted at strategies aimed at achieving subscriber growth. Central to this plan was the decision to target password sharing, a practice that while possibly causing short-term churn, could ultimately boost subscriber numbers and top-line growth. This move did not go unnoticed by the stock market, a sphere teeming with unexpected surprises this year, including the rise of artificial intelligence and the resilience of the U.S. economy.

Among these unexpected twists, the stock prices of Netflix emerged as a pleasant surprise. After a period of decline in 2021 and 2022, where shares lost more than two-thirds of their value over a six-month span, Netflix turned the tide. The streaming stock is now up 44% year to date and 137% over the past year, primarily due to the introduction of password-sharing fees and the launch of an ad-supported subscription tier.

As per a press release published by Netflix earlier this year, over 100 million households worldwide share passwords among accounts. With Netflix's Q1 2023 earnings report indicating 232 million global paid subscribers, this implies that over 40% of Netflix's total paid subscriber base engages in password sharing. The revenue missed due to this practice is substantial and poses a significant challenge for Netflix, prompting the company to take firm action against users sharing passwords.

Netflix's password-sharing blueprint, focusing initially on countries like Canada, New Zealand, Portugal, Spain, and the United States, has been closely monitored by media outlets. Antenna, a tech data tracking and publishing firm, has reported that Netflix witnessed an average of over 70,000 daily signups for the first few days following its announcement of the U.S. crackdown on shared accounts beginning May 23.

On May 26 and 27, Netflix gained approximately 100,000 subscribers each day, revealing a dramatic increase in subscriber growth that even outpaced the early days of COVID-19, when the streaming giant saw a significant influx of new business.

As the stock prices of Netflix continue to soar, investors are showing increasing interest. Wall Street analysts, including Jeff Wlodarczak from Pivotal Research Group, have upped their price targets on Netflix shares, applauding the password-sharing clampdown. His new target of $535 is the highest listed on FactSet, surpassing Wells Fargo’s $500 target.

A key driving force behind this enthusiasm is Netflix’s decision to clamp down on account sharing, a practice that had been previously overlooked by the company. Management believed that password sharing was a means of promoting the service, confident that password borrowers would subscribe directly when ready. However, the maturing user base eventually led Netflix to address this issue. Netflix now sends notifications to its members, emphasizing that accounts are intended only for them and their household members. An additional $7.99 per month allows members to share their accounts with individuals outside their household. This policy, implemented in May, has driven a sharp increase in stock prices of Netflix, with the stock surging nearly 20% since the U.S. announcement on May 23.

Alongside password-sharing crackdown, Netflix has also launched an advertising-supported tier of service. This move reflects an effort to tap into new revenue streams and supplement payments from subscribers. With these strategic measures, Netflix remains well-positioned to generate solid subscriber and revenue/free cash flow growth, even in a potential global recessionary environment. The password-sharing crackdown is expected to drive subscribers either to pay extra for adding additional users or to encourage freeloaders to sign up for their own accounts. The lower-priced, ad-supported tier may be especially appealing to those who must pay for Netflix on their own for the first time.

Undoubtedly, the stock prices of Netflix bear witness to the company's successful strategies and forward-thinking approach. Whether it's the new ad tier or the paid sharing initiative, Netflix has exhibited an unwavering commitment to maintaining its leadership in the streaming industry. By balancing profitability with content spending, Netflix continues to command a large audience, setting the stage for continued growth and profitability in the future.| That's TradingNEWS