Surge in Netflix Ad Subscriptions
The accelerating surge in ad-supported subscribers presents a bullish case for Netflix (NFLX), according to Oppenheimer analyst Jason Helfstein. The company announced that the monthly active users (MAUs) for its ad-supported tier had surpassed 23 million, marking a significant increase from 15 million in November and 5 million in May.
Positive Q4 Net Add Expectations
Helfstein’s analysis suggests that the rapid growth in ad subs indicates a likelihood for Q4 net adds to exceed both the company’s guidance and Street expectations. He forecasts 10 million consolidated net adds in the fourth quarter, compared to the consensus of 8.7 million.
Projection for Future Growth
Using the data points for ad-supported users, Helfstein estimates the addition of ~0.7 million MAUs/month in 1Q23, followed by 1.25 million in Q2, 1.6 million in Q3, and 2.6 million in Q4. He also anticipates a significant upturn to 4 million MAU adds per month in December and January, indicating an optimistic outlook for sub growth in 2024. Helfstein expects ad-supported MAUs to reach 51 million by the end of the year.
Positive Implications for Revenue and EBITDA
Helfstein asserts that the accelerating subscriber growth bodes well for the company’s advertising business, leading to an increase in average revenue per membership (ARM) levels. He anticipates $6 billion in ad revenue in 2025, with significant incremental margins, potentially resulting in $4.8 billion of incremental EBITDA compared to the total of $7.3 million in 2023E.
New Price Target and Rating
Helfstein revised the price target for Netflix stock from $475 to $600, forecasting a 22% growth over the next year. He maintains an Outperform (Buy) rating on the stock, reflecting his positive stance. However, it’s important to note that Oppenheimer’s outlook is one of the most optimistic on the Street.
Market Consensus and Forecast
As of now, the average price target for Netflix stock is $491.10, while the stock receives a Moderate Buy consensus rating based on 25 Buy ratings, 9 Holds, and 1 Sell. It’s clear that Helfstein’s analysis represents a particularly upbeat outlook compared to the broader market sentiment.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. All investment decisions should be made after conducting personal research and analysis.
