What happened
Netflix (NFLX -0.63%) saw its stock price climb 2.8% on Wednesday to close at $224 per share. The streaming-service stock jumped as high as 4.6% at around 1:15 p.m. ET before settling in with a modest gain at the closing bell.
It was a positive day overall on Wall Street, as the Dow Jones Industrial Average was up 30 points, the S&P 500 was up 13 points, and the Nasdaq was up 86 points.
So what
Netflix made some news Wednesday related to its upcoming launch of its ad-supported tier. The Wall Street Journal reported Wednesday afternoon, citing a document that Netflix shared with its ad buyers, that it plans to reach 40 million viewers globally with its ad-supported tier by the third quarter of 2023. The stock price shot up shortly after the article was published.
Netflix announced plans to launch an ad-supported tier earlier this year. The launch was initially set for early 2023, but according to several sources, including Variety and the Wall Street Journal, it could happen in the fourth quarter of this year, possibly as early as November. The idea is to get ahead of Walt Disney's planned December launch of Disney+ with ads.
According to Variety, the Netflix ad-tier would have about four minutes of ads per hour and cost between $7 and $9 per month.
Now what
A couple of analysts also weighed in on the news on Wednesday, including Doug Anmuth, analyst at J.P. Morgan Securities. Anmuth maintained a neutral rating on Netflix with a $240 price target. While he cited limited subscriber visibility in the second half of this year, he was encouraged by recent hires that should help with the ad-tier rollout and improving investor sentiment about the ad service.
Matthew Harrigan, an analyst with Benchmark, has a $157 price target for Netflix and a sell rating. He's concerned that Netflix is being too aggressive in its ad pricing, while offering "vanilla" ad-feature capabilities.
Investors should keep a close eye on this as we head into the fourth quarter.
