Analyst Steve Cahall believes that thanks to better content, along with the company's new ad-supported subscriptions and paid account sharing, it helps improve the company's user base.
Cahall noted that the company's key performance metrics still have "room" to beat expectations in 2023 despite increased competition, early COVID boosts have faded and content growth has slowed. Netflix shares are down about 48% year-to-date, and now seems like a good time for investors to enter the market.
After delving deeper, Cahall noted that the enhanced global network connectivity could help Netflix add about 8 million net new subscribers a year before it increases its market share. Next year, churn is likely to improve, with 10 million more users due to content, new ad subscriptions and paid sharing.
According to Cahall, Netflix's ad-supported subscription, which launched last November, is already available in 11 countries, and those countries may account for about 75% of Netflix's user base. The new level of subscription could add $300 million in revenue in 2023, $1.6 billion in 2024, and $3.4 billion in 2025, while the increase to average revenue per user could be a little later, perhaps in the second half of 2024.
Netflix's revenue is expected to grow 7% in 2023, rebounding from what the company saw as a difficult 2022, the analyst added.
Cahall explained, "Our conclusion is that 2022 reflects a decline in content share, a lack of original hits, and a fading of COVID subscriptions, none of which should be read in advance."