Netflix Stock Rises 9% in One Day... Is the Ad-Supported Plan Paying Off?

Closed at $371... Highest increase rate this year
Media: "Netflix business model is showing results"

The stock price of global online video service (OTT) Netflix surged 9% in a single day. This came after news that the number of users of the new ad-supported subscription plan reached 5 million.

According to the New York Stock Exchange (NYSE) on the 18th (local time), Netflix's stock closed at $371.29 (496,786 KRW), up 9.22% from the previous trading day. This is the largest increase this year and the highest closing price in over 13 months since April 5 last year, when it was $380.15 (508,640 KRW).

The sharp rise appears to be driven by the announcement of the number of subscribers to the ad-supported plan made the previous day. Netflix stated at a briefing for advertisers that "the global monthly active users (MAU) of the low-cost plan with ads have reached approximately 5 million."

This milestone was reached just six months after the plan was launched in November last year. Netflix also added that "25% of new subscribers are signing up for this plan."

Initially, Netflix adopted an ad-free subscription system, but to overcome subscriber stagnation, it launched a lower-priced plan with ads in 12 markets including Korea and the United States last November.

Meanwhile, at the briefing the previous day, Ted Sarandos, Netflix co-CEO, revealed plans to increase advertisers' options and introduce new types of advertisements. He also emphasized, "By offering multiple subscription plans alongside ads, we can add more subscribers."

The number of users of the ad-supported plan disclosed by Netflix is reportedly below the company's initial target. However, CNBC analyzed the stock price increase this week as "indicating that Netflix's business model is beginning to deliver results."