Netflix Rallies Off Q3 Earnings: 8 Analysts On Future Price Increases, Ad-Supported Plans And More

Streaming giant Netflix Inc NFLX reported third-quarter financial results after the market close Wednesday.

Shares of the streaming company are soaring Thursday after the report. Here’s a look at what Netflix analysts are saying about the report and the company's future. 

The Netflix Analysts: Bank of America analyst Jessica Reif Ehrlich has a Buy rating and $525 price target. 

JPMorgan analyst Doug Anmuth has an Overweight rating and raised the price target from $455 to $480.

Macquarie analyst Tim Nollen has a Neutral rating and $410 price target.

Evercore analyst Mark Mahaney has an Outperform rating and $500 price target.

Wedbush analyst Alicia Reese has an Outperform rating and $525 price target.

Guggenheim analyst Michael Morris has a Buy rating and $460 price target.

Oppenheimer analyst Jason Helfstein has an Outperform rating and raised the price target from $470 to $475.

Needham analyst Laura Martin has a Hold rating and no price target.

Related Link: Netflix Price Hike Shocks US, UK, France, How Rival Streaming Giants Are Faring 

Bank of America On Netflix: Updates on password sharing and price increases were among the highlights in the third quarter for Ehrlich.

The company announced it is raising prices for the Basic and Premium tiers in several regions, with more to come in the future. Ad-supported plans and Standard tiers will keep the same pricing.

“We expect this will be an ARM (average revenue per member) tailwind either from the price increase itself or the resulting migration of these actions toward other higher ARM plans,” Ehrlich said in a note. 

Guidance for subscribers and margins in the fourth quarter were well received by the analyst.

“We also anticipate password sharing to drive member growth over the next several quarters which in combination with the announced price increases should buoy growth into CY24.”

JPMorgan On Netflix: The third quarter showed the early success of the paid sharing crackdown, Anmuth said.

The 8.8 million subscribers added represent the highest third-quarter number Netflix has achieved. 

“3Q results were strong across most dimensions,” Anmuth said.

Anmuth applauded Netflix's price increase, adding that he was previously cautious on the timing of price hikes.

Macquarie On Netflix: Improvements are “taking shape” for Netflix, according to Nollen.

Average revenue per member is a key item for the company, he said, adding the metric declined for a fourth straight quarter. 

“Management expects this metric to be flattish in Q4 as newly announced price hikes in the US, UK and France that take effect from today will roll on gradually,” Nollen said.

The analyst said the ad-supported plan is slow to grow, but more efforts are coming.

“We are optimistic on the upside potential to subs, revenue and earnings from paid sharing efforts and its ad tier, but are conscious of the time it will take for these to contribute.”

Evercore On Netflix: Netflix's third quarter was better than expected and included several key positives, Mahaney said.

The analyst said subscriber additions and subscriber guidance for the fourth quarter were both stronger than expected.

“We continue to believe that NFLX’s ad-supported offering and password-sharing initiatives constitute major growth curve initiatives – catalysts that will drive a material reacceleration in revenue and EPS growth.”

Wedbush On Netflix: The streaming company showed that it can generate “significantly more free cash flow,” Reese said.

“We think Netflix has reached the right formula with its global content to balance costs and generate increasing profitability, while password sharing crackdown and eventually its ad-supported tier should further boost cash generation,” Reese said.

 Netflix is a leader in the streaming space and is showing strength at a time when streamers are shifting strategy, the analyst said. 

“We think that the ad tier, while still dilutive to ARPU, is limiting typical churn and elevating overall subscriber numbers.”

Guggenheim On Netflix: The third quarter results helped ease Netflix investors' concerns Netflix, Morris said.

The analyst is positive on the long-term opportunity for Netflix to be the global streaming video leader, with a bit of caution.

“Post upward relief rally, we expect debate to focus on normalized growth post paid-sharing rollout, which likely limits near-term potential upside,” Morris said.

The analyst said the ad-supported tier continues to be the company's focus and is contributing to membership growth.

Oppenheimer On Netflix: Price increases for plans and margin expansion could drive growth for Netflix, Helfstein said.

“Advertising subs ramping up and should benefit from phase-out of low-priced Basic plan for ‘new’ subs and pricing increase,” the analyst said. 

Churn continues to be below management expectations, showing the password sharing crackdown is working, he said. 

“We believe NFLX’s initiatives such as password sharing rules, advertising and optimizing subscriber plan choices will drive subscriber growth and average revenue per membership, therefore leading to higher revenue.”

Needham On Netflix: A more cautious outlook on Netflix comes from Martin, who maintains a Hold rating.

The analyst is worried for Netflix in 2024, with consumers pushing back against streaming price increases to favor linear television.

“Netflix announced price increases in the US, UK and France, starting yesterday, but its new original content is being negatively impacted by the ongoing Hollywood strikes,” Martin said.

The analyst expects increased churn in the fourth quarter. Martin also highlighted concerns around the ad-supported plan growing slower than expected.

“We recommend investors stay on the sidelines of NFLX.”

NFLX Price Action: Netflix shares are up 16% to $400.38 on Thursday versus a 52-week trading range of $252.09 to $485.

Read Next: Trading Strategies For Netflix Stock After Q3 Earnings 

Photo courtesy of Netflix.