Stock of the Week: Netflix

Password sharing doesn’t seem to be the problem.

Andrew Willis 2 May, 2022 | 1:56AM
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Andrew Willis: Netflix (NFLX) encountered its first streaming subscriber net loss ever in the last quarter, following increased competition and recent price increases to their service – yet management seemed to focus on password sharing and shortages in smart TVs for the loss in customers…

Senior equity analyst Neil Macker says cracking down on the 100 million-plus non-paying households that use Netflix will not be the panacea that investors might expect, while it might be able to squeeze a few bucks out of some subscribers, others might just cancel.

Plus, the last thing a streaming service should do is remind customers of the monthly fees. Yet that seems to be happening a lot recently. And those customers that had a borrowed password? Many of them might not view the service as valuable enough to pay for.

Maintaining a strong audience is also important for things like advertising, where the company is likely to try out lower prices in markets like India, combined with lower-priced ads. This move isn’t likely enough to jumpstart growth, but we do expect it to help make up around 70 million more members by 2026 – so at least Netflix doesn’t seem to be going the way of Blockbuster just yet.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Netflix Inc191.40 USD1.90Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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