Netflix stock rises toward 16-month high as analyst praises path to make more money on ‘borrowers’

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Shares of Netflix Inc. jumped toward a fresh 16-month high Wednesday, after J.P. Morgan analyst Doug Anmuth boosted his price target by 24%, amid increased optimism over the opportunity for the streaming video giant to make money on password sharers and borrowers.

Anmuth said that, following Netflix’s “Upfront” presentation in mid-May, he had increased confidence that roll out of the company’s paid-sharing model to additional markets later that month would have “less friction” than what was experienced in February.

“We believe that is playing out as [Netflix] has improved communications [with] sharers and borrowers (as well as non-sharing members) and eased concerns related to access while traveling,” Anmuth wrote in a note to clients.

Netflix’s stock
NFLX,
-1.05%

climbed 3.3% in premarket trading, which would put it on course to open around the highest closing price since February 2022.

As a result of the rollout to more than 100 markets on May 23, Anmuth said he thinks the company will make money on 14 million password borrowers by the end of 2023, 26 million by the end of 2024 and 33 million by the end of 2025.

He also believed monetized borrowers will be split roughly evenly between new subscribers and extra members, which don’t count toward net subscriber additions. He also expected a little more than half the new subscribers to opt for the lower-priced ad-tier subscription plan.

As a result, he said, he expects paid-sharing revenue of $2.4 billion in 2024 and $3.5 billion in 2025.

Anmuth reiterated the overweight rating he’s had on the stock since October 2022, but lifted his price target to $470 from $380. The new target implied about 18% upside from Tuesday’s closing price of $399.29.

Anmuth’s new target was tied with that of Maria Ripps of Canaccord Genuity for the second-highest among the 44 analysts surveyed by FactSet, behind only Wells Fargo’s Steven Cahall’s price target of $500.

The average target was $374.80.

Netflix shares have soared 35.4% year to date through Tuesday, while the Communication Services Select Sector SPDR exchange-traded fund
XLC,
+0.41%

has run up 32.5% and the S&P 500 index
SPX,
+0.24%

has advanced 11.6%.

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