Why Oppenheimer Sees 40% Upside for Netflix (NFLX) Stock

  • Oppenheimer has reiterated its Netflix (NFLX) price target of $415.
  • Analyst Jason Helfstein believes that advertisements and paid account sharing will benefit growth.
  • NFLX stock closed higher by 3%.
NFLX stock - Why Oppenheimer Sees 40% Upside for Netflix (NFLX) Stock

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Shares of Netflix (NASDAQ:NFLX) stock closed in the green after Oppenheimer analyst Jason Helfstein reiterated an “outperform” rating and a price target of $415. Compared with yesterday’s closing price of $294.94, Oppenheimer’s price target implies an upside of 40%.

In the past year, shares of NFLX stock are down by about 10%. Since February, shares have fallen by about 20%, which Helfstein attributes to “fears around higher churn from enforcing password sharing and slower ad launch.”

However, these fears may be overblown, as the analyst believes that NFLX offers significant upside at current levels. Helfstein notes that his original thesis concerning the company has remained unchanged, as he continues to see advertisements increasing Netflix’s total addressable market (TAM), easing content competition, and paid account sharing as a source of growth.

Oppenheimer Reiterates NFLX Stock Price Target of $415

Helfstein sees paid account sharing, which has received controversial backlash, as a long-term growth driver. The analyst believes the feature can add $2 to $8 billion in revenue. Helfstein also believes that competitors to the streaming platform are currently focused on profitability instead of growth.

“Competitors appear more focused on profitability, suggesting we are past peak competition, as evidenced by NFLX’s second highest streaming net adds in 4Q, recent increased content spend efficiency, and 4Q mgmt. Comments around lower churn,” said the analyst.

So, how do other research firms view NFLX? A total of 35 firms offer coverage of the stock with an average price target of $357.09. Besides Oppenheimer, the most recent price target update is attributed to Loop Capital analyst Alan Gould, who raised his price target to $330 from $320 while maintaining a “hold” rating.

Loop Capital conducted an account-sharing survey based on 500 U.S. Netflix users and came to a mixed conclusion. Gould estimates that charging for password sharing will increase revenue by 3% and average revenue per user (ARPU) by 27%. At the same time, he predicts that paying subscribers will decline by 19%. Meanwhile, 30% of the participants polled stated that they would cancel their accounts.

“We suspect NFLX will institute password sharing domestically around mid-year, initially experience higher churn and lower engagement, with churn levels and engagement returning closer to normal levels in the second half of the year,” explained Gould.

Netflix will report its first-quarter earnings on April 18.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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