FBR Raises Netflix PT To $142, Says Company Is Increasing Prices 'The Right Way'

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Coming on the back of Netflix, Inc. NFLX yet again positively surprising the Street with its quarterly performance, FBR Capital Markets raised its price target on the stock to $142 from $129 while reiterating its rating of Outperform.

Barton Crockett, FBR Capital Markets, was on CNBC to explain the reasoning behind the price target increase.

Logic Behind PT Increase

"Netflix has created a product that people like as much or more than pay TV, but it's priced well below that," Crockett said. "And so these guys I think have a lot of room to grow revenue per subscriber, to grow subscribers domestically and internationally and they don't face a lot of pressure to grow their content spend as aggressively."

He continued, " So I think what we saw in the quarter is evidence that what we're seeing in survey data is playing out. The sub. growth was better than expected, the margins were better than expected and the expense outlook was better than expected. So on the back of this, we're actually taking up our price target 10 percent to $142."

Increasing Prices The Right Way

Crockett was asked if he is disappointed that Netflix is not raising prices in any meaningful way. He replied, "Well, I think what they're doing is the right way to increase prices, not the wrong way which is what they did a few years ago with Qwikster."

"The right way is to put in a price hike that people don't notice, becomes an annuity that grows about 5 percent per year through all sorts of kind of back door, less noticeable ways -- charge extra for things like Ultra HD, charge extra for multiple streams, perhaps over time clampdown on some of the free riders out there. These guys have a lot of easy ways to push up pricing at a mid-single-digit plus pace for a long period of time," Crockett said.

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Posted In: Analyst ColorCNBCPrice TargetAnalyst RatingsMediaBarton CrockettFBR
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