Interactive Investor

ii view: Netflix seeks profit boost from password sharing crackdown

19th April 2023 11:18

by Keith Bowman from interactive investor

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This global streamer more than halved in value last year but is up 13% so far in 2023. Buy, sell, or hold?


First-quarter results to 31 March

  • Added 1.75 million net new subscribers to a total of 232.5 million
  • Revenue up 3.7% year-over-year to $8.16 billion
  • Earnings per share (EPS) down 18% to $2.88


  • Expects EPS of $2.84 in the current second quarter

ii round-up:

Media streamer Netflix Inc (NASDAQ:NFLX) launched a password sharing crackdown in four of its national markets during the first quarter of the year but delayed a broader launch including in its home US market until the next quarter.

The delay came as it benefited from its customer experience to date, strengthening management’s belief in the initiative’s ability to boost earnings over time. Marginally weaker-than-expected revenues following its rollout across Canada, New Zealand, Spain, and Portugal were countered by slightly higher-than-forecast earnings following more restrained on content spending. 

Netflix shares fell around 10% following the news but quickly recovered to trade little changed in after-market US trading. That followed a 13% year-to-date gain coming into this latest announcement, similar to fellow streamer The Walt Disney Co (NYSE:DIS).  

Netflix highlighted that its experience to date had seen membership initially dip following the launch of the password initiative but then recover as borrowers began activating their own accounts. 

In Canada, a market similar to its home US business, its paid membership is now larger than prior to the initiative’s launch, with revenues now growing faster than in the US. 

Subscriber growth for the first quarter totalled 1.75 million net new members, taking its total base to 232.5 million subscribers. That was below analyst forecasts for 2.2 million but much better than the 200,000 loss suffered this time last year and following tough comparatives versus the pandemic. 

Other Netflix initiatives to increase monetization of its services include the previous launch of a lower cost service but with the addition of corporate paid-for advertising. 

Broker UBS upped its rating to a ‘buy’ from ‘hold’ following the results, flagging stronger conviction in new monetization initiatives. 

ii view:

Founded in 1997, Netflix today has a stock market value of around $148 billion, similar to Sky owner Comcast Corp Class A (NASDAQ:CMCSA). A producer of content, its popular programmes have included Squid Game, Breaking Bad, Bridgerton and The Witcher. It operates across four key regions: UCAN (the United States and Canada), EMEA (Europe, Middle East, and Africa), LATAM (Latin America), and APAC (Asia Pacific). 

For investors, elevated inflation and a cost-of-living crisis may see many households looking for savings, with cuts to non-essential entertainment services like Netflix a possible candidate. Competition from the likes of Walt Disney and Prime owner Inc (NASDAQ:AMZN) remains high, while unlike rivals such as Apple Inc (NASDAQ:AAPL) and Comcast, Netflix does not pay a dividend. 

On the upside, current management initiatives regarding password sharing could potentially see current borrowers convert to further paying members. The lower cost advertising plan does ease the cost for subscribers, making it more viable during a cost-of-living crisis, while Netflix has also been testing an online game offer in selected countries following the previous purchase of a video games maker.

On balance, and while some caution still looks sensible, the broad trend from linear TV to streaming should continue to benefit this now established giant of the media world. 


  • Streaming TV services overall still growing
  • Potential to add sport content


  • Intense competition from Disney, Apple and others
  • Subject to currency movements given growing overseas customer base

The average rating of stock market analysts:


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