Netflix Will Now Automatically Cancel Inactive Accounts

Streaming giant Netflix (NFLX) has now taken the bold step of proactively canceling accounts of inactive subscribers, the company has announced.

“You know that sinking feeling when you realize you signed up for something but haven’t used it in ages? At Netflix, the last thing we want is people paying for something they’re not using” explained Eddy Wu, Product Innovation at Netflix.

This means that anyone who has not watched anything on Netflix for a year since they joined will be asked to confirm they want to keep their membership. The same will apply to anyone who has stopped watching for more than two years.

Members will start seeing these emails or in app notifications this week, says Netflix. If they don’t confirm that they want to keep subscribing, the company will automatically cancel their subscription. “These inactive accounts represent less than half of one percent of our overall member base, only a few hundred thousand, and are already factored into our financial guidance” Wu stated.

Anyone who cancels their account and then rejoins within 10 months will still have their account details just as they left them, Wu added.

Citigroup analyst Jason Bazinet has just reiterated his hold rating on NFLX, while ramping up his price target from $350 to $450 (3% upside potential).

“While the firm has made significant progress in reshaping the video ecosystem and garnering a substantial subscriber base, we continue to believe Netflix faces potential challenges in generating material operating leverage with its cash content spending,” he writes. “Furthermore, at current levels, valuation leaves little room for error, in our view.”

Indeed, the stock has rallied 35% year-to-date- boosted by the fact that NFLX’s limited ad exposure means it “doesn’t face the cyclical risk that other media firms are grappling with.”

Overall, Netflix scores a cautiously optimistic Moderate Buy consensus, with 23 buy ratings offset by 7 hold ratings and 4 sell ratings. Meanwhile the average analyst price target stands at $466 (7% upside potential). (See Netflix stock analysis on TipRanks)

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