Netflix (NFLX) Password Sharing Crackdown May Lead to Additional Subscriber Opportunities - Cowen

April 12, 2021 8:45 AM EDT
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Cowen analyst John Blackledge reiterated an “Outperform” rating on Netflix (NASDAQ: NFLX) ahead of the company’s earnings that are due next week.

Cowen analysts are expecting net adds to be in line with a guide, fueled by ongoing lockdowns in certain parts of the world, Europe in particular.

“NFLX added ~37MM total paid net adds in '20, up 31% y/y. With a third wave of COVID leading to recent lockdowns in key markets, we expect Netflix engagement to remain high. Finally, we view 1Q21 survey data from our proprietary internet tracker as positive for net adds,” Blackledge wrote in a note.

The analyst believes that password-sharing activity available on the Netflix platform may lead to additional long-term subscribers opportunity. The latest data from Cowen shows about 45% of US respondents use a shared Netflix password.

“Our monthly proprietary survey of 2,500 US consumers suggests NFLX could add incremental subs by more aggressively deterring password sharing (as a reminder, press reports have indicated that Netflix is testing emails that remind some viewers to create their own accounts if they do not live with the paid subscriber). We think the ~45% of US users who share a password per our survey leaves NFLX well positioned should they choose to aggressively tamp down on password sharing, given the ramp of Originals & consistently increasing value prop of the service.”

“While our survey shows that password sharing has declined from 55% of HH in 1Q16, it still comprises ~45% of Netflix households in 1Q21 to date (through Feb '21); we think Netflix's recent efforts are likely a natural progression as the biz matures in key markets. We also acknowledge that some sharing among respondents is likely occurring within the same family household,” Blackledge adds.

Cowen has a $675.00 per share price target on NFLX.

For an analyst ratings summary and ratings history on Netflix click here. For more ratings news on Netflix click here.

Shares of Netflix closed at $552.62 yesterday.

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