Analyst Steve Cahall believes that better content, as well as the company's new ad-supported subscriptions and paid account sharing, will help improve the company's user base.
Cahall pointed out that despite intensified competition, the early boost from the COVID-19 pandemic having faded, and slower content growth, the company still has "room" to exceed expectations in its key performance metrics in 2023. Netflix's stock price has fallen by about 48% so far this year, and now seems like a good time for investors to enter the market.
After in-depth research, Cahall pointed out that enhanced global network connectivity could help Netflix add approximately 8 million net new users annually before its market share increases. Next year, user churn may improve, and the number of users may increase by 10 million due to content, new ad subscriptions, and paid sharing.
According to Cahall, Netflix's ad-supported subscriptions, which were launched last November, are already available 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 in average revenue per user could come later, perhaps in the second half of 2024.
The analyst added that Netflix's revenue is expected to grow by 7% in 2023, rebounding from what the company considered a difficult 2022.
Cahall explained, "Our conclusion is that 2022 reflects a decline in content share, a lack of original hit shows, and a decline in COVID-19 subscriptions, none of which should be interpreted in advance."