By Sam Boughedda
UBS expects Netflix's (NASDAQ:NFLX) first quarter to show continued progress toward re-accelerating growth, analysts told investors in a note Friday.
"We believe subs will come in ahead of mgmt's outlook for "modest" adds, helped by a slower ramp for paid sharing (shifting potential churn into 2Q)," the analysts wrote.
UBS, which has a Neutral rating and $350 price target on the stock, now looks for 2.1 million adds in the first quarter and 2.5M in the second quarter (1.5M/2.8M prior), while its full-year estimate remains at 13M vs. 9M in 2022.
However, they expect the key debate into the print to be the impact of paid sharing on near-term growth.
"Netflix introduced paid sharing in CA, NZ, PT & ES in early Feb but no new mkts since (prior commentary suggested a broader roll-out for late 1Q). We continue to believe password sharing restrictions could provide a MSD % uplift to rev (ex churn) & quickly turn accretive," they added.
"We also see the roll-out as key to driving scale in ad, which could benefit from sharers migrating to the lower price ad product as well as better targeting as ad buyers will know the exact HH being reached. We estimate ad tiers could drive a ~10% tailwind to rev, but this uplift will be seen over multiple yrs."