US streaming provider Netflix's stock rose significantly on Friday after analysts welcomed its recent crackdown on password sharing.
Wall Street's positive response came after an analyst from Pivotal research group raised the price target for Netflix shares from $425 to $535, citing several factors including the password sharing clampdown.
Notably, this new target represents the highest on the street, indicating the growing optimism surrounding the company.
Data provided by Antenna, a company that monitors subscriber growth, supports the bullish sentiment. According to Antenna, since the announcement of Netflix's intentions to tackle password sharing, the streaming platform has experienced its four largest days of user acquisition in the past four and a half years.
This surge in subscriber sign-ups is a clear validation of analysts' predictions, such as those from Pivotal, that the password sharing crackdown will benefit Netflix significantly.
Antenna's data reveals that on May 26 and May 27, Netflix witnessed nearly 100,000 new sign-ups per day in the United States alone.
The statistics further reinforce the belief that this move will drive growth and bolster Netflix's position in the market.
Consequently, Netflix's stock has experienced an upward trajectory in response to these developments.
Pivotal, in justifying its increased price target, highlighted the potential positive impact of improved free cash flow expectations in this year and beyond.
However, the key driver behind the revised target was the firm's belief that Netflix represents a unique tech growth story.
Pivotal emphasized that the company remains well-positioned to sustain solid subscriber, revenue, and free cash flow growth, even in a potential global recessionary environment.
This outlook is bolstered by the better monetization of the over 100 million households currently using Netflix through password sharing.
Interestingly, the Pivotal note also reiterates a view previously expressed by the firm, suggesting that Microsoft may eventually step in and acquire Netflix.
According to the analysts, they believe that after a strong performance in this year and next year, Netflix's management may consider selling the company in 2025, with Microsoft being the most logical acquirer.
The positive response from analysts and the surge in subscriber acquisition following the password sharing crackdown highlight the confidence in Netflix's growth potential.
While the company faces challenges in curbing unauthorized account sharing, its proactive measures have resonated with investors and analysts alike, driving a renewed wave of optimism surrounding the streaming giant's future.
