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They explained that NFLX shares have underperformed since its second-quarter earnings, down -7% compared to the SPX decline of -2%, although there has been a solid recovery from recent lows.
“We remain positive on NFLX shares, but areas of investor push-back include 1) Paid Sharing monetization and magnitude/timing of uplift to ARM and revenue; 2) core subscriber growth and NFLX’s future pricing power; and 3) the quality and trajectory of FCF in 2023 and 2024,” the analysts wrote.
JPMorgan continues to believe paid sharing will prove highly accretive to NFLX revenue over time, while advertising will also help more in the fourth quarter and into 2024.
In addition, the firm sees advertising becoming a bigger and more durable revenue stream than paid sharing over time, with the streaming giant also able to maintain pricing power.
