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The analysts said they are raising the price target in anticipation of a rise in subscribers due to bullish indicators for Paid Sharing. Furthermore, they anticipate higher revenue per subscriber with the potential discontinuation of the lowest-priced ad-free plan, which is currently being tested in Canada. Shifting away from the lowest-priced ad-free tier is the obvious next step, unlocking approximately $15.50 in revenue per subscriber (advertising + subscription) compared to $9.99 for the ad-free option. This transition to a $6.99 ad plan could result in approximately $4.4 billion in annual revenue, accounting for approximately 13% of the projected ’23E revenue. Additionally, they believe that an extended writers’ strike and recent media layoffs could serve as other potential near-term tailwinds.
Lastly, Netflix’s share of US TV viewership has increased to 2.6% quarter-to-date (QTD), up from 2.3% last year and 2.5% in 1Q23. While they expect a gradual geographic rollout throughout the next year, they believe that investors can already begin factoring in the additional revenue today.
