Please ensure Javascript is enabled for purposes of website accessibility

Why Netflix Stock Popped Today

By Rich Smith - Mar 11, 2021 at 4:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Netflix confirms it's cracking down on password sharing.

What happened

Bad news for Netflix (NFLX 3.51%) customers turned into good news for Netflix shareholders Thursday, as rumors that the company is cracking down on password sharing were quickly confirmed by Netflix itself.

And Netflix stock jumped 3.7% on the news today.

Origami dollar folded into an arrow pointing up

Image source: Getty Images.

So what

As CNBC reports, roughly one-third of customers who subscribe to Netflix share their passwords with family and friends and passing acquaintances who live outside their homes. Historically, Netflix has been OK with this, preferring to consider it a way to give unofficial free trials to prospective paying customers, rather than crack down on the trend as virtual theft of its services.  

No more.

Earlier this week, a handful of Netflix users reportedly received notices on their screens advising them that "if you don't live with the owner of this account, you need your own account to keep watching." They were then instructed to verify their ownership of the account by entering a code sent to the owner's email address or phone number, reports The Streamable.

Asked about the reports, Netflix confirmed that a test is in fact ongoing, to "ensure that people using Netflix accounts are authorized to do so."  

Now what

While "this is a test, only a test" at present, it sounds like a change in policy could be in the works, and that could have big implications for Netflix shareholders -- much bigger than today's 3.7% move in the stock price might indicate.

How big? Well, consider: If one-third of Netflix users today don't pay for the service but use it anyway, then converting all those users into payers could -- theoretically, at least -- boost Netflix's subscriber numbers, and its revenue, by as much as 50%.

Today's 3.7% move could be only the beginning of the good news for this stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$183.41 (3.51%) $6.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
327%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.