Netflix has a ‘multi-year’ revenue opportunity, analyst says

There is a real chance for Netflix to make a meaningful business by offering an ad-supported pricing tier for consumers, Cowen analyst John Blackledge argues.

“I think it will be a net-net-incremental [positive],” Blackledge said. “It is a positive multi-year revenue [opportunity] for the company.”

Blackledge estimates that Netflix could add 4 million new subscribers to an ad-supported business in 2023, providing millions in new revenue.

Netflix shed 200,000 paying subscribers in the first quarter and expects to lose another 2 million in the current quarter. Analysts had been forecasting the company would add 2.4 million subscribers in Q2 before Netflix offered its forecast in April.

The stock crashed 35% after the earnings report and is down nearly 71% so far in 2022.

Blackledge has an outperform rating on Netflix stock with a $325 price target.

Goldman Sachs analyst Eric Sheridan recently tweaked his financial model on Netflix to suggest the company may have trouble in a recessionary period holding onto customers amid efforts to increase prices and prevent password sharing.

“We are lowering our 2022-2023 revenue estimates to incorporate a greater probability of a weaker macro environment,” Sheridan wrote in a note to clients. “More specifically, we modestly lower our paid streaming [subscriptions] across every region but incorporate higher average revenue per user levels in the U.S. in 2024 and beyond to reflect Netflix’s initiatives around its ad-supported tier and password sharing.”