Netflix (NFLX) stock experienced an increase on Wednesday as investors reacted to the news of the streaming video giant’s expanded efforts to crack down on rampant account sharing.
The popular internet television network began sending emails to its U.S. members on Tuesday, notifying them about account sharing outside of their households. Netflix is now offering these members the option to share their account with someone who doesn’t live with them for an additional $7.99 per month. Alternatively, individuals using a shared account can transfer their profile to a new paid membership.
Additionally, Netflix clarified that members can still access their Netflix service while on the go or during holidays by reviewing the devices signed into their account, according to a blog post.
Prior to the broader rollout this week, Netflix had been testing its account-sharing enforcement in four countries, including Canada, New Zealand, Spain, and Portugal. The company estimates that over 100 million households worldwide have been sharing Netflix accounts. As of the first quarter, Netflix had reached 232.5 million paid subscribers globally.
Netflix Stock Rises After Crackdown The company utilizes Internet Protocol addresses, device IDs, and account activity to determine whether a device is associated with the same Netflix household or not.
On the stock market, Netflix stock saw a 2.5% increase, closing at $364.85.
On May 18, Netflix stock broke out of a cup-with-handle base at a buy point of $349.90, according to IBD MarketSmith charts.
Sharing Is Caring, But It Will Cost You Wedbush Securities analyst Alicia Reese noted in a client note that Netflix’s password-sharing crackdown, along with its ad-supported service tier, is expected to enhance the company’s cash generation. Reese reiterated an outperform rating on the stock with a price target of $410.
Reese suggested that if 10% of subscribers opt to pay an account-sharing fee, Netflix could generate an incremental revenue of $1.7 billion.
“While the crackdown will likely drive higher churn in the near term, we think these users are likely to return in the following weeks or months,” Reese said.
Oppenheimer analyst Jason Helfstein maintained an outperform rating on Netflix stock, raising the price target to $450 from $415.
According to IBD Stock Checkup, Netflix stock ranks second out of 21 stocks in the Leisure-Movies & Related industry group, while the industry group itself ranks 15th out of 197 groups tracked by IBD.
