Market Overview

Netflix Investors: Subscriber Growth Is Overrated, Pay Attention To Price Elasticity Instead!

Netflix Investors: Subscriber Growth Is Overrated, Pay Attention To Price Elasticity Instead!
Related NFLX
There's A Lot Of Capital In The Gaming Industry, And It's Not Just In eSports
Experts: Viacom-Netflix Deal Could Spark New Media Trend Toward OTT Content Partnerships
The Urge To Merge: Possible Implications From The AT&T-Time Warner Ruling (Seeking Alpha)

Netflix, Inc. (NASDAQ: NFLX) are flirting with $100 a day after the company beat Wall Street's earnings and revenue expectations. The company also trounced consensus subscriber numbers 5.59 million to 5.15 million.

On Wednesday morning, Drexel Hamilton's Tony Wible maintained a Buy rating on Netflix after the results, adding that 2016 full year subscriber growth is on pace to beat his expectations. "While often overlooked, the DVD business beat on subs, ARPU, and margin, which provides capital for the streaming operation," he reminded readers.

Related Link: Netflix Lower Despite Data Beat

Of note, Wible warned some investors may "put too much weight" behind subscriber growth when, in reality, price elasticity is more important. " A $1 increase in pricing across 170 million future subs is a far bigger driver of revenue than one million extra US subs," he explained. The company can -- theoretically -- increase average revenue per user without affecting subscriber growth.

What Risks Remain?

Wible outlined two main risks facing Netflix: re-pricing from studios that could increase OTT competition and make it harder for Netflix to scale content spending, along with stricter government scrutiny.

Here's what traders are watching in the stock.

Netflix is down 6 percent on Wednesday thus far.

Latest Ratings for NFLX

Jun 2018Monness Crespi HardtMaintainsBuyBuy
Apr 2018Bank of AmericaMaintainsBuyBuy
Apr 2018Canaccord GenuityMaintainsBuyBuy

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas News Education Events Analyst Ratings Movers Tech Best of Benzinga


Related Articles (NFLX)

View Comments and Join the Discussion!