Netflix is fully betting on the advertising business. Analysts say it can help it get through difficult times

Video streaming giant Netflix is fully betting on the advertising business, and analysts say it can help it get through difficult times. Under pressure this year, video streaming giants $Netflix(NFLX.US)$ The stock price is trying to make a comeback after the collapse. Netflix's stock price has fallen by about 75% from its highest point to its lowest point, and has now risen by more than 55% from its lowest point of around $163 per share. Although Netflix's low-cost, ad-based subscription service will definitely change the company's development status as the streaming industry enters a new state of development, I do think some of the concerns about the company have been exaggerated. In any case, analysts and investors are anxious to see how this rating of low-priced subscriptions with ads and high-priced services without ads will affect Netflix's financial performance at a time when the US economy may be in recession.Netflix enters the advertising market or helps it overcome difficultiesGiven the loss of subscribers this year, I think Netflix's decision to accept ads may help it achieve a significant recovery, as the macroeconomic turmoil seems to be getting closer to people. At the end of the day, Netflix still has strong content and channels. Despite increased competition in recent years, this streaming pioneer still has many popular TV shows that will definitely be a topic of discussion after dinner. Whether it's “The Watcher” or the latest season of “Love is Blind,” there's always something fascinating about Netflix. Netflix's weak subscribers may be partly due to its lack of competitiveness in the increasingly crowded streaming market, but I think the main reason is consumer financial constraints. Advertising-based subscription services can easily solve the financial burden problem of consumers. These consumers previously abandoned Netflix because they were forced to do so due to the economic environment. Understandably, many paying users may be tempted by low prices to lower their subscription levels. However, I think most users who can afford ad-free services will keep their original options. This is because for this group of consumers, spending a few yuan a month so that they don't have to read ads is a bargain. Although Netflix will have fewer advertisements than those on TV channels anyway, this does affect consumers' sense of immersion and experience to a certain extent. As a result, I think there will still be people who choose high-priced ad-free subscription services, so concerns that low prices will affect high-priced subscription services seem exaggerated. The timing for Netflix's entry into advertising is perfect, as inflation and economic downturn have led to consumer purchasing power issues and fewer subscriptions. Therefore, even if the US enters a period of economic recession, I am still optimistic about Netflix's stock.Netflix's new valuation is impressiveAfter such drastic valuation adjustments, Netflix's stock price has now reached an impressive price-earnings ratio of 23.6 times. Since the ad-based subscription business may mitigate the adverse effects of the recession, I think Netflix's stock is the most cost-effective of all FAANG companies. If there's any difference, it's that Netflix's subscriber growth momentum is likely to pick up from its low a few quarters ago. Additionally, cheaper subscriptions can open the door for cost-conscious consumers, and once their financial situation improves as the economic cycle changes, they may upgrade to more expensive, ad-free subscriptions. Netflix's third-quarter earnings are encouraging. The increase in subscribers marks the end of two consecutive quarters of losses for the company. As management is testing the waters of the new business, I think Netflix's stock price is fully capable of rising further from the current level. Also, Netflix's foray into the gaming industry is probably serious. Recently, the company bought Cozy Games' developer Spry Fox. As Netflix continues to improve its mobile game development capabilities, the company can attract more fans while increasing the platform's user stickiness. Compared to blockbuster movies, mobile games can help increase profits without spending too much money. But as of now, Netflix's gaming business hasn't improved. However, with each acquisition being completed, I think Netflix is one step closer to being a gaming giant.