Analyst Steve Cahall believes better content, as well as the company's new ad-supported subscriptions and paid account sharing, has helped improve the company's user base.
Cahall noted that while competition has intensified, COVID-19 pandemic's early boost has faded and content growth has slowed, the company's key performance metrics still have "room" to beat expectations in 2023. Netflix shares are down about 48% so far this year, and now seems like a good time for investors to enter the market.
After delving deeper, Cahall pointed out that the enhancement of global network connectivity may help Netflix add about 8 million net new users per year before its market share increases. Next year, churn could improve thanks to content, new ad subscriptions and paid sharing, and the number of users could increase by 10 million.
According to Cahall, the ad-supported subscription launched by Netflix in November last year has been launched in 11 countries, and users in these countries may account for about 75% of Netflix's user base. The new tier of subscriptions 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 come later, perhaps in the second half of 2024.
The analyst added that Netflix's revenue in 2023 is expected to grow 7%, rebounding from what the company viewed as a difficult 2022.
Cahall explained, "Our conclusion is that 2022 reflected a decline in content share, a dearth of original hit shows, and a fading Covid subscription, which should not be interpreted in advance."