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Why Netflix Stock Popped Today

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

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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.

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