24 October 2022

Insights

Trading NFLX in 2022 & 2023

NFLX skyrocketed this month, with share prices rising 12.57% to $245.10 at the time of writing. The streaming giant also reported an additional 2.41 million subscribers across 190 countries. So everything looks peachy for the streaming giant, and sentiment is rising. But is the optimistic sentiment warranted?

The recent bullish price moves come after the long and shocking fall from the all-time high of $690.31, which was just one year ago. Now, traders are seeing a cliche buy low/sell high opportunity, and NFLX is again on the rise. But there’s a lot going on in the Netflix boardroom, and analysts have mixed opinions on how the new subscription strategy will affect stock prices in Q4 2022 and beyond.

Before you consider trading NFLX, let’s get you up to speed on all things Netflix, so you can trade responsibly without falling victim to the media mayhem and hype.

Content drives NFLX

Netflix has a considerable library of streaming options, with over 500 new titles released in 2021 alone. The content expansion didn’t come cheap, costing over $20 billion to acquire and produce new series documentaries, popular TV series franchises, and feature films. 

So why is NFLX struggling to regain consistent growth? There is one analysis that you won’t find on any trading chart, one that shows an interesting correlation between the streaming service and the stock price, and that’s the hype behind their shows.

Even Netflix themselves admit that subscription numbers and revenue are at the mercy of their shows' success.  Stranger Things, Bridgerton, and Squid Game all made a big splash around the world and prompted a buzz, which led to increased subscriptions. But whenever new releases flop, subscription renewals fall. To put it simply, NFLX is only as good as their most recent blockbusters.

Q4 is already underway, and new big-budget releases are just around the corner as winter viewing kicks in. Also, last year’s big hits are coming back with renewed seasons, which means viewer-ratings and subscriptions should soar, and so will the share prices… in theory.

Netflix subscription model

Netflix is all the talk right now, and traders are probably wondering how a new subscription model will influence NFLX. The cheaper ad-supported option, launching in 12 countries this November, will surely affect share prices, but nobody knows in which direction… yet.

Netflix is optimistic about the move and predicts an expansion of subscribers who cannot pay the higher price of the “premium” service. Up to 5 minutes of ads will appear per 1 hour viewing.  This is not a groundbreaking move from Netflix.

Competing streaming services such as Disney and HBO started offering ad-supported content last year, and they saw budget subscriptions grow to 8% of total revenue within a short time. Account closures due to a limited budget account for about 30% of Netflix cancellations, so you can see why the streaming giant might view a budget subscription as a good idea. 

The budget plan could be a way to avoid completely losing that revenue source. Of course, this new model isn’t without risk. Subscribers of the more expensive version of Netflix may choose to lower their premium status in favor of the ad-supported subscription. A definite step backward.

There’s more. The budget subscription is not the only big news coming from Netflix.

Password sharing

Netflix plans to crack down on password sharing in 2023. Netflix estimates that password sharing is common among most subscribers. In fact, of the 220 million viewers worldwide, almost half of them are believed to be using Netflix through shared passwords.

While Netflix already has measures to prevent password sharing, such as number of profiles and limits on how many devices can stream per account, further limits to password sharing may negatively affect loyal Netflix fans and diminish subscription levels.

The bottom line

Netflix crashed by 60% this year alone, and that number includes the bullish buzz of this week. The new subscription model has pros and cons, and their recent announcement of pushing hard into Asia won’t yield results any time soon, if ever. So it all comes down to the programming.

Fresh seasons of existing blockbuster shows are coming back soon, which may boost revenue and share prices in the short term, but unless Netflix can revolutionize its service, a recovery to the $600+ price range seems unlikely.

2023 will be a wild ride for CFD traders choosing NFLX, but Exness’ volatility protection features will help avoid stop outs, as will our Custom Stop Out Level. Make sure you create a dedicated sub-account with appropriate leverage to equity.

Related articles