On July 27, Netflix stock initiated a remarkable upward journey, bouncing back from its lowest point in over a month.

After languishing at $413.17 per share, the NFLX stock has experienced a sudden surge, with the market opening in New York this morning at $438.97 per share.

The abrupt change in direction has left investors curious about the factors behind this rally and what the future holds for Netflix prices.

Driving factors behind the rally

One significant catalyst for the recent surge in Netflix’s stock can be attributed to research published by corporate data analytics company Kantar on July 28.

The report highlighted that in the second quarter of 2023, 7% of UK households took out a new streaming subscription with Netflix, a notable increase from the 5% recorded the previous year.

Furthermore, the study indicated that 68% of homes in the UK now have at least one video-on-demand (VOD) service, with a total of 19.97 million households subscribing to such services. This data suggests that Netflix’s uptake is still on the rise in key markets.

Additionally, in the United States, subscription uptake experienced rapid growth at the beginning of the summer, largely due to Netflix's crackdown on password sharing.

The company's move to restrict the number of screens that can be logged into one account aimed to protect its revenue and curb the practice of accessing the streaming service for free. This decisive action not only resonated with investors but also signified the company's commitment to safeguarding its revenue stream.

Netflix's volatility and market sentiment

Netflix, commonly regarded as one of Silicon Valley's 'big tech' firms, has been an exception in the FAANGS stock fraternity, which typically experiences relatively low volatility. Throughout this year, Netflix has demonstrated higher volatility, with its stock price influenced by announcements regarding subscription increases in specific key markets, such as the UK, US, Canada, and Australia. Additionally, investors are closely monitoring the company's ability to organically sign up new users as it transitions away from leniency on password sharing.

The long-term outlook

As we move into August, the current surge in subscription levels may continue, partly driven by the need for those accessing other people's accounts to subscribe.

However, the holiday season often results in higher television viewership, which could temporarily boost subscription numbers.

The real test will come at the end of August when schools restart, annual leave concludes, and people return to work. The saturation point for subscribers who now have to pay for their monthly subscription will become apparent, and investor confidence in continued growth could be tested.

Conclusion

Netflix's recent surge in stock value is undeniably linked to its increased subscription rates and efforts to curtail password sharing. As a frontrunner in the streaming industry, Netflix remains under close scrutiny from investors and the market.

While short-term fluctuations may be influenced by announcements and subscription trends, the company's long-term outlook hinges on its ability to sustain organic user growth and navigate potential saturation points in key markets.

As we approach the end of August, investors will undoubtedly keep a watchful eye on Netflix to gauge its trajectory in the highly competitive streaming landscape.