Netflix stock rose on Monday as analysts on both sides of the Bull-Bear debate weighed in on potential plans to crack down on password sharing.
Benchmark analyst Matthew Harrigan, who rates the stock a Sell, lowered his price target to $472 from $485. Harriganrefers to reportsthat certain users received messages Friday asking them to make their own account if they don’t live with the actual subscriber.
“This test is designed to help ensure that people using Netflix accounts are authorized to do so,” a spokesperson told MarketWatch.
Harrigan argues any such crackdown will require finesse. He refers to estimates from research firm Magid that about 33% of Netflix members share passwords but argues that those benefiting from password sharing may be more casual or economically sensitive users.
“Although a crackdown on password sharing could emerge as an at least marginal long-term positive, we believe that it somewhat dampens pricing power even as competition from Disney+ and others mounts,” he writes.
Harrigan added that Netflix stock’s appealhas been diminished by rising competition from Disney+ and the rollout of Covid-19 vaccinations. He estimates Netflix will hit 313 million global members in 2024, not far ahead of Walt Disney’s(DIS) global target of 230 million to 260 million Disney+ subscribers during fiscal 2024.
“Disney will almost certainly emerge as the overall global streaming leader if ESPN+ and Hulu are aggregated as well,” he writes. “Disney+ achieved 100M global customers on its platforms earlier this month only 16 months after launch—which had taken Netflix a decade to achieve.”
On the side of the debate is BMO Capital Markets analyst Daniel Salmon, who has an Outperform rating and a $700 price target. He titled his late-Sunday night note, “The Password Is: StillTopPick42021.”
He argues that Netflix has always had the option to clamp down on password sharing in its back pocket, and believes such a move can drive gross subscriber additions and help member growth as the company approaches tough year-over-year comparisons from the 2020 shutdowns. The move could drive upside to consensus expectations for subscribers during the fiscal first quarter, according to Salmon.
Netflix stock rose 0.4% to $520.25 on Monday, while the S&P 500 index was up about 0.7%. There are 40 analysts covering the stock listed by FactSet. Of that group, 27 analysts have Buy or equivalent ratings, while four have Sell or equivalent ratings. The rest are in between. But the mean price target for the stock is $626.88, according to FactSet, which implies about 20% upside from recent levels.