Here’s What Analysts Think About Netflix Raising Its Prices Again

Streaming giant Netflix announced on Tuesday that it would be raising its subscription prices again.

This is the fourth time in history that the company has raised prices. While members may not be thrilled with the price increase, analysts were loving the news.

Stifel analyst Scott Devitt remarked, “Pricing Wind Beneath its Wings,” in a headline. According to the analyst, Netflix’s service is now in line with HBO Now and Hulu’s premium service and that the company will be able to “continue its recent pace of domestic price increases every 16-18 months.”

Goldman Sachs’ Heath Terry loved the price hike as well and upped his price target on the stock from $400 to $420.

Stifel also said, “We are bullish on the company’s ability to execute the pricing increase, though note in the near-term, domestic subscribers churn may tick up as the company introduces the new pricing levels to existing members. … We see the potential for cautious 1Q guidance on domestic paid net subscriber additions due to this factor … In the U.S., Netflix’s new pricing compares to HBO NOW at $14.99 per month and Hulu’s ad free product at $11.99. We believe it is possible Netflix will continue its recent pace of domestic price increases (every 16-18 months), as its Standard plan is still $2 below HBO’s product with a significantly larger content offering.”

Credit Suisse stated, “Investors will likely view this above-Street estimate increase quite positively, bolstering confidence in subscriber trends, pace of revenue growth and ability to achieve guidance for margin gains.”

“We noted in our recent ‘NFLX Monthly’ note that we expect the content slate to strengthen into mid-year and to ‘watch for tactical price increases into the strengthening content slate.’ … We view the read-through as positive as it relates to the company’s confidence in the content slate and subscriber trajectory in 2019,” remarked SunTrust.

RBC chimed in with, “We believe this action has a high probability of success, further fueling the Netflix flywheel. … The simple point here is that this price increase – if successfully implemented – can generate a material boost to NFLX’s profitability (we estimate $2.6B in Operating Profit in FY19) and/or help cover its Cash Content Costs, which we estimate at approximately $14B in FY19.”

Piper Jaffray commented, “We believe the primary determinant in the ability to raise price is subscriber perception of content quality. … In Nov-18, we surveyed >1,100 U.S. subscribers and found that 71% of them feel Netflix content has improved in the past year. … We believe, as long as the vast majority of subs perceive that the service is improving, Netflix will be positioned to periodically raise prices.”

Disclaimer: We have no position in Netflix, Inc. (NASDAQ: NFLX) and have not been compensated for this article.