NFLX - Netflix ad-tier picking up the slack from dwindling paid-sharing subs: Wells Fargo

2024-01-17 11:05:12 ET

Netflix’s ( NASDAQ: NFLX ) unpopular decision to crack down on password sharing has driven global subscribers to more than 245M. But with paid-sharing dwindling, it's up to the advertising-supported tier to drive growth, Wells Fargo said.

Netflix could add 10.4M subscribers in the fourth-quarter, analysts led by Steve Cahall said, up from their previous estimate of 9.5M, as the ad-tier gains momentum.

First-quarter subscriptions could come in at 4.2M (compared to the Wall Street estimate of 3.9M), enhanced by the ad-supported tier, the analysts said.

By the second half of this year, new subscriber adds could slow down to 3.8M from 7.3M as the company “laps the benefits of the paid sharing crackdown,” the analysts said. Total net adds for 2024 could be 19.5M (down from a previous estimate of 22.), though above Wall Street’s estimate of 17.5M new subscribers.

The bank also boosted its fourth-quarter estimates, as it believes Netflix could earn $2.22 per share on $8.72B in revenue, up from a previous forecast of $2.16 per share and $8B in sales.

Full-year estimates were also tweaked, as the bank now sees full-year sales at $38.9B and earnings of $15.83 per share.

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