Netflix Loses Spanish Users
Netflix (NFLX) recently faced a setback in Spain as it rolled out its password-sharing crackdown in the country. According to new research released recently, the company lost over 1 million users in Spain, with two-thirds of those leaving due to password sharing. The number of cancellations tripled compared to the year-ago period, and the remaining subscribers are also showing signs of planning to cancel their plan in the second quarter of business.
Netflix plans to roll out the policy globally in the near future, and it previously said it expects short-term churn before users sign up for their own accounts. The company revealed it is “pleased with the results” so far and plans to learn from each rollout. Analysts however continue to remain upbeat about the initiative, emphasizing its role as a longer-term growth driver along with the platform’s recently launched ad-supported tier.
However, the research data suggests there could be more churn in user to come. The company lost over 1 million users in a little over a month, which has major implications for Netflix and whether it decides to continue with its crackdown globally. The next several quarters will demonstrate how many of these consumers decide to re-subscribe, which will be vital to Netflix’s strategy in enforcing these new regulations which are raising the ire of paying users.
Despite the initial churn, analysts believe that most of it will be impulsive and that those members will return to the service over the course of 2023. Jefferies analysts recommends “buying any dip associated with a conservative 2Q23 guide,” adding that Netflix is poised to be the number one distributor in video content amid longer-term revenue drivers.
Netflix’s crackdown on password sharing has faced some initial challenges, it is expected to be a longer-term growth driver for the company. The company plans to learn from each rollout, and Wall Street analysts remain optimistic about its potential to drive revenue growth and expand margin and free cash flow. However, the company will need to monitor subscriber churn closely and ensure that it is not alienating its user base in the process. According to 41 analysts, the average target price for Netflix Inc over the next 12 months is USD 350.68, and the average analyst rating is a “Buy”. The Stock Target Advisor’s analysis of Netflix Inc is Slightly Bullish, based on 7 positive and 4 negative signals. The stock price was USD 321.15 at the last closing, with changes of -0.61%, -2.20%, and +61.87% over the past week, month, and year, respectively.