Investment Idea

Would it be time to take a look at Netflix stock?

Vontobel Markets
31/10/2023 | 2 min read

Netflix's initiative to ban account sharing was hotly debated and, above all, strongly criticized when it was introduced. However, the recently published quarterly figures paint a very positive picture, which was also rewarded by investors with an increase in the share price. Especially in the area of new customer acquisition, Netflix was able to make significant gains.

Netflix offensive against account sharing

Account sharing, i.e. passing on access data to friends, was actually not allowed from the beginning. Nevertheless, Netflix tolerated this practice in the past, which was particularly popular with young users. Earlier projections by Netflix came to around 100 million people who used the access data from another household. In the summer of this year, the streaming service started to actively counteract this user behavior. Users have since received a corresponding notification and the account owner is prompted to add additional users for a monthly fee of SEK 49. Alternatively, users can create their own account. This approach enabled Netflix to increase its revenue by 7.8 percent compared to the same period last year.

Netflix now also with advertising?

Less than a year ago, Netflix released its cheapest subscription model, where users pay less for their subscription but get to see ads. Netflix is putting a lot of focus on this area, as fewer and fewer people are using traditional television, instead switching to streaming providers like Netflix. Consequently, advertisers will also increasingly turn away from classic television. Netflix is a good alternative here, because it allows even more specific selection of target groups. In this subscription model, Netflix was able to increase by almost 70 percent compared to the previous quarter.

Thus, there is an opportunity for companies working with Netflix to present their brand and product in different ways. Frito-Lay's Smartfood popcorn brand will serve as the sole title sponsor for the next season of the reality hit "Love Is Blind." Likewise, there is also a planned binge ad format. Here, a 30- or 60-second brand spot will be inserted between episodes as a "binge" (when watching multiple episodes of a television series in a row) before another commercial-free episode plays. "At a time when more than 80 percent of our ad-supported members watch two hours or more of TV, this subscription will reward viewers and allow brands to stand out from the crowd," said Netflix VP of global advertising sales Peter Naylor.

Is Netflix finally becoming profitable?

Due to Netflix's great market power, the company can also afford to raise prices. For example, the price of the Basic and Premium subscriptions is increased promptly. Thus, the action against account sharing has also not led to a wave of cancellations as expected, instead there has been a large growth in new users. In addition, revenue also increased by around seven percent year-on-year. Net income even increased by almost 20 percent.

Meanwhile, Netflix produces formats in over 50 countries and languages to expand its regional market power. However, many regional series and films are also finding favor in the rest of the world, such as "Squid Game" from Korea or "Lupin" from France. With new exclusive content, Netflix is building customer loyalty and encouraging potential new customers to take out a subscription.

Netflix, one year daily chart

Netflix 1 y 2023-10-31_093731.png
Source: Bloomberg. Note: Past performance is not a reliable indicator of future results.

Netflix, five year weekly chart

Netflix 5y 2023-10-31_093652.png
Source: Bloomberg. Note: Past performance is not a reliable indicator of future results.


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