Netflix stock rally continues amid password sharing optimism

Netflix Inc. shares were continuing their rally Friday amid optimism for the company's password-sharing crackdown.

The streaming giant is clamping down on about 100 million people who are using Netflix NFLX, accounts instead of paying for their own. Early data shows that the company may be having more success with the initiative than expected at this stage. While Netflix has yet to change its policy on password sharing in the U.S., it is beginning to do so in Canada, according to a BofA Securities analyst, who recently cited third-party data showing that gross account additions in Canada have accelerated meaningfully.

In the short run, that suggests potential upside to first-quarter results, according to Jessica Reif Ehrlich, BofA spokesman. Reif Ehrlich had been expecting a decline of 350,000 in the region.

She wrote that the new data shows that net adds will be much better than current estimates and that the UCAN sub results were trailing expectations, despite the data indicating net adds will be much better than current estimates. This aligns with management commentary that churn initially will increase and then quickly reverse, which appears to be exactly what is happening. Netflix shares were up more than 2% in Friday trading after a 9% increase in Thursday action.