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decreased by about 60% in light of the strengthening of competitors Amazon Prime and Disney Plus. The company lost many subscribers who moved to competitors, which led it to lay off about 150 employees. At Netflix, they realized that they had to increase the attractiveness of the company and came up with the idea of a discounted subscription, which would include advertisements that would appear occasionally during viewing. Now it seems that there are those who believe that the idea could be the one that will lift society back up. Analyst Hamilton Faber raised the company’s rating in light of the potential he sees in the new service and gave it a target price of $283 compared to the previous target price of $211, the stock rose 9.3%.
Faber believes that the company’s revenue for each customer is expected to be three times greater than that of the competitor Hulu thanks to the high viewing percentage of each subscriber in the company. As the company can sell more discounted subscriptions and increase the amount of content they will watch, it will be able to significantly increase revenue thanks to the marketing content it publishes. Faber claims that the data “indicate an annual growth rate of 13% between this year and 2025, compared to the previous consensus of 9%.”
Earlier this month, analyst Matthew Harrigan announced that Netflix’s pricing is “too optimistic” and that the stock is expected to experience further declines. Harrigan claimed that “the ad model will fail, Netflix is a ‘sell'” and gave the company a target price of $157. At the same time, the company estimated that the ad service would gain 40 million views around the world and sent the stock to jump 3%.
According to Faber’s estimates, the revenues from advertisements will bring the company 6.7 billion dollars in the next three years, and he believes that by 2025 the revenues from advertisements will make up about 17% of the company’s total revenues. Faber also raised the expected earnings per share for 2024 to $14.14 compared to the previous estimate of $12.71 per share, the Wall Street consensus now stands at earnings of $13.56 per share.
In addition to the subscription project, the company announced today that it will build a new gaming studio in Finland. Helsinki, the capital of Finland, is where the company Next Games is based, which Netflix purchased at the beginning of the year as part of its entry into the gaming world. According to analyst Tom Forte, “Netflix is a company that thinks about the long term” and gave the transition from renting movies on DVD as an example. Today’s companies cannot be left behind or they will freeze to death and although it seemed that Netflix was indeed in this situation, today it proves to the market that it has much more to offer.
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