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JPMorgan still bullish on Netflix despite customer frustration on password crackdown

JPMorgan analyst Doug Anmuth suggests investors 'buy pullbacks' in Netflix shares despite user concerns and fears of a subscriber churn

One analyst is doubling down on his prediction that Netflix (NFLX) is still a good buy—despite user frustration surrounding Netflix's password-sharing crackdown, fears of short-term subscriber churn and a sagging stock price.

Netflix shares, down about 4% since the company's fourth quarter earnings results, have lost more than 17% of gains since hitting a year-to-date high of $369.02 a share on January 26. Wall Street punished the streamer last month after it slashed prices by 50% in about 100 overseas markets.

"We recognize the [near-term] noise and believe in many respects that buying NFLX for 12 months out may be easier than for the next 3-4 months. But overall we remain bullish," JPMorgan analyst Doug Anmuth wrote in a new note on Monday.

Anmuth, who reiterated his outperform rating and 12-month price target of $390 a share, told clients to "buy pullbacks" in the stock. He categorized advertising momentum as one of the main catalysts for his bullish call, coupled with "solid content" and password sharing, which should drive revenue, margin expansion, and free cash flow in 2023.


On Sunday, Bloomberg reported Netflix's ad-supported service reached roughly 1 million monthly active users in the U.S. after its second month on the market—bucking earlier reports the ad tier was off to a slow start.

The user base grew by more than 500% in the first month from its launch and another 50% in its second month, the report added. Netflix declined comment on the Bloomberg report, saying the only external data regarding its subscriber numbers was in its latest earnings results.

As the company looks to capitalize on more revenue opportunities, games will be another area of focus.

Netflix announced in a blog post on Monday it has 70 games in development with external partners and an additional 16 games in progress at the company's in-house game studios. The streamer has released 55 games so far, with about 40 more slated for later this year.

Bangkok, Thailand - April 25, 2022 : iPhone 13 showing its screen with Netflix application.
Bangkok, Thailand - April 25, 2022 : iPhone 13 showing its screen with Netflix application. (Wachiwit via Getty Images)

Still, despite those longer-term growth drivers, JPM's Anmuth warned near-term noise and negative headlines could cloud sentiment, especially as the company weighs further rollouts of its password-sharing crackdown.

"There is growing concern that early friction [surrounding password sharing] could delay or stagger the rollout, pushing it deeper into 2Q and beyond," he said.

In its quarterly letter to shareholders published in January, Netflix said it would be intensifying its push to combat password sharing in the first quarter, although the streamer did not provide details on when exactly that would occur and what countries would be impacted.

Since then, Netflix has broadened its crackdown to include countries like Canada, New Zealand, Portugal, and Spain, in addition to the test countries of Chile, Costa Rica, and Peru. So far, there has been no announcement regarding U.S. users.

Anmuth said that could put the company's projections for more subscribers in the second quarter than the first quarter "at risk." He said it also increases the potential that the password-sharing crackdown lands during a seasonally-weak quarter that "does not appear to have as much hit content."

JPMorgan expects Q1 subscribers to come in at 1.5 million with Q2 net additions hitting 3.25 million. However, the bank said a slower rollout of Netflix's password-sharing initiatives could mean first quarter net additions come in better than expected.

Netflix will release its first quarter financial results on Tuesday, April 18.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at

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