Netflix investors ‘too pessimistic’ about password sharing crackdown: analyst

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() Controversial password sharing crackdownWhile that has angered users and concerned investors, it may not be such a bad thing, at least according to one analyst.

“The company has been looking at this for years,” said Jason Helfstein, managing director and head of Internet research at Oppenheimer & Oppenheimer. They intentionally made Netflix the easiest service to share and watch and build tremendous loyalty from their shows. ” Co., told Yahoo Finance Live in an interview on Wednesday.

“So we think investors are very pessimistic about how this is going to play out,” he said, estimating the crackdown on password sharing could drive $2-$8 billion in incremental revenue this year.

In its Quarterly Letter to Shareholders Published in January, Netflix said it would accelerate its push to tackle password sharing in Q1, although the streamer did not provide details on when exactly that would happen and which countries would be affected.

Since then, Netflix has broadened its operations to include countries such as Canada, New Zealand, Portugal and Spain, in addition to the trial countries of Chile, Costa Rica and Peru. As of , no announcement has been made regarding US users.

Signage is seen at the Netflix booth on the convention floor at Comic-Con International on July 21, 2022 in San Diego, California, US.  REUTERS/Bing Guan

Signage is seen at the Netflix booth on the convention floor at Comic-Con International on July 21, 2022 in San Diego, California, US. REUTERS/Bing Guan

The password crackdown may have forced Netflix to slash prices overseas, a major concern for investors who saw shares sink 7% since announcing the price cut on February 23.

“We believe such dramatic price cuts in so many markets left the Street confused,” Citi analyst Jason Bazinet wrote in a new note to clients on Thursday, noting the price cuts are pending. refers to the global enforcement of

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The company reduced prices by 50% in nearly 100 overseas markets including Yemen, Jordan, Iran, Kenya, Croatia, Venezuela, Indonesia. According to Citi Research, this is about 6% of its customers.

“The Netflix story is going to be a bit complicated as investors struggle with new advertising levels”. And Concurrent password sharing enforcement,” Bazinet added.

Still, Netflix's password crackdown and its Recently Launched Ad-Supported Tier have been seen as meaningful profitability drivers, especially as competition within the streaming space increases.

Helfstein, who has an Outperform rating on the stock and a current price target of $415 per share, cautioned that it's still early days for Netflix's advertising levels, but the company has great potential to improve the overall advertising experience for consumers. There are tools for

“Netflix should be able to have very targeted ads. There's a lot of data that shows that as long as the ads are targeted and relevant, consumers don't hate them,” he said. “For most consumers, if they really find the ads annoying, they'll pay the extra $3.”

Since Netflix launched its advertising tier in the US on Nov. 3, shares have risen nearly 13%, surpassing the Nasdaq's 9% gain over the same time period. The stock is up about 5% since the start of the year.

with additional reporting from Brian Sozzi

Alexandra Canal is a senior and media reporter at Yahoo Finance. follow him on twitter @alliecanal8193 and email her at [email protected]

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