Netflix May Not Be Done Raising Prices

Netflix, Inc.NFLXannounced last weekwell received by Wall Street analysts and helped the stock hit new all-time highs of nearly $200 per share.

However, the price hike was expected for quite some time, and it is "surprising" as to why a price increase wasn't announced earlier, Loop Capital Markets' David Miller commented in a research report. It is also somewhat surprising as to why Netflix only raised the prices for its high- and medium-end streaming packages as the low-end price point of $7.99 per month is price inelastic.

Miller maintains a Buy rating on Netflix's stock with a price target boosted from $212 to $228 (see Miller's track record here).

Related Link: Netflix Flexes Its Pricing Power

It is important to keep in mind that Netflix's July 2011 price increase was not at all well received by the public. The stock dipped from a split-adjusted price of $42.16 to around $12.50 per share in a few months, the analyst pointed out.

Back in 2011, thousands of angry Netflix customers expressed their frustration to a 60 percent price increase on the company's Facebook page and the company's blog, CNN reported at the time. The company did argue at the time that its price increase still gives consumers a "terrific value" proposition.

But one of the comments on Netflix's Facebook page, which received more than 4,800 "likes" suggested the price increase is "just yet another way to choke more change out of your customers."

Needless to say, the 2011 price increase debacle is something that Netflix's management team never wants to see again, Miller said. As such, a price increase, which ignores the $7.99 per month package, could prove to be a "trial balloon" for an eventual price increase to $8.99 per month.

Finally, Netflix is scheduled to report its fiscal third-quarter results next Monday, and the analyst is modeling the company to report revenue of $2.98 billion, EBIT of $212.3 million, non-GAAP EPS of 34 cents and the addition of 4.37 million net subscribers.

Related Link: Wall Street Is Mostly Positive On Netflix's Price Hike