Netflix (NFLX) stock jumped on Wednesday, rising more than 4.5% amid a broader tech rally as analysts continue to champion the streaming giant's crackdown on password sharing and its new ad-supported tier.
Oppenheimer analyst Jason Helfstein published a note to clients on Tuesday arguing both initiatives should boost 2025 revenue by 40% compared to 2022 at "very high incremental margins."
"We think the complexity of the multiple drivers are being under-appreciated by investors, as we have only seen 2% of the benefit so far," Helfstein wrote, adding these initiatives create "a clear path back to double-digit revenue growth."
The analyst estimated revenue from stopping paid sharing and ad-supported subscribers will increase from 1% in the second quarter to 17% of Netflix's top-line by the end of 2025.
"Our estimates imply Netflix directly recaptures 46% of the total estimated 100 million account sharers by the end of 2025. Given the partial rollout of paid sharing yielded ~6 million subs in one month, we believe there is upside to our above consensus 2024 net add estimate of ~24 million," Helfstein wrote.
Helfstein expects the company will add 63 million new subscribers by 2025.
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Netflix stock has gained 20% in the last three months and roughly 50% this year.
The company rolled out its password-sharing crackdown to US subscribers in May after first announcing the initiative in October 2022.
Amid its crackdown, the company beat subscriber growth expectations in its fiscal second quarter results last month, notching 5.89 million net additions versus the 2.1 million Wall Street expected. The platform lost nearly 1 million subscribers in the prior year period.
"Looking specifically at the US market, Netflix was able to drive over a million new subscriptions [in the second quarter], which had been roughly flat for a number of quarters at this point," Third Bridge analyst Jamie Lumley previously told Yahoo Finance. "Right now, a lot of these studios and streamers are seeing that this initiative can work and it can drive growth in what has been a saturated and stagnant market domestically."
Disney (DIS), which is still aiming to achieve streaming profitability by the end of fiscal 2024, revealed during its latest earnings call that it will address password sharing sometime next year.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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