Growth Driven by Paid Sharing and Global Expansion
Netflix attributed its third-quarter revenue growth to a 9% year-over-year increase in average paid memberships, largely due to the successful rollout of paid sharing. Additionally, the company highlighted its “strong, steady programming” and continuous global expansion as contributing factors. During a videoconference call to discuss the results, Netflix Co-Chief Executive Greg Peters revealed that the company plans to continue implementing paid sharing over the next several quarters.
J.P. Morgan analyst Doug Anmuth commented on the effectiveness of paid sharing, noting the 8.8 million net adds in the third quarter as evidence of its success. He also raised J.P. Morgan’s price target for Netflix to $480 from $455 and maintained an overweight rating.
KeyBanc Capital Markets Upgrades Netflix Rating to Overweight
Related: Netflix Stock Soars, Adding Over $21 Billion to Market Cap
This upgrade aligns with the opinions of other analysts surveyed by FactSet. Out of the 48 analysts surveyed, 25 have assigned either an overweight or buy rating for Netflix. Another 21 analysts have given a hold rating, while only two analysts have assigned a sell rating.
Wedbush, a leading financial service and investment firm, has maintained its outperform rating for Netflix. In a note released on Thursday, Wedbush analyst Alicia Reese expressed confidence in Netflix’s strategy. Reese wrote, “We think Netflix has reached the right formula with its global content to balance costs and generate increasing profitability.” Furthermore, the analyst highlighted the potential impact of cracking down on password sharing and the introduction of an ad-supported tier, which is expected to boost cash generation.
Related: Netflix Shares Surge as Streaming Site Raises Prices
The positive outlook for Netflix has had an immediate effect on its stock. In premarket trading on Thursday, share prices jumped by an impressive 13.9%.