Market Overview

In The Case Of The Netflix Price Increases, There Are More Pros Than Cons

In The Case Of The Netflix Price Increases, There Are More Pros Than Cons
Related NFLX
Netflix's Race Against Time
Q2 13F Roundup: How Buffett, Einhorn, Loeb And Others Adjusted Their Portfolio
Amussen Hunsaker & Associates LLC Buys SPDR S&P Dividend, Boeing Co, SPDR Select Sector ... (GuruFocus)

Since Netflix, Inc. (NASDAQ: NFLX) announced it will increase prices on its U.S. members for the first time since 2015, investors have legitimate reasons to be concerned that subscriber losses could outweigh any revenue benefit. But these concerns may be overblown, at least according to Bernstein's Todd Juenger.

Juenger maintains an Outperform rating on Netflix's stock with a price target boosted from $203 to $230 amid a view that the recent price increase will result in only a "slight decrease" in subscriber growth, but as a whole the price increase boosts Netflix's valuation.

Stronger Than Ever

Netflix's price power remains as strong today as it ever has, the analyst explained. Since 2014, the price of a standard U.S. membership has increased at a 10 percent compounded annual growth rate (CAGR) for new subscribers. During the same time period, Netflix managed to grow its subscriber base at a larger 12 percent CAGR rate from 34 million to 50 million.

There are nevertheless a few cons from the price increase, Juenger added. Perhaps most notably, Netflix may have opened the door for competitive services to undercut on price. After all, Netflix has kept its prices "so low" for such a long time period it's difficult for a competitor to offer a cheaper price, but this is exactly what has happened as Hulu announced a price decrease from $7.99 to $5.99 for new subscribers.

The pros, particularly an increase in Netflix's stock valuation, outweigh the cons and investors should have confidence that Netflix's price increase "demonstrates confidence in sub trajectory."

Related Links:

Binge-Watching All The Rage With Youngsters: 68% Of Millennials Prefer 'The Netflix Way

Not Everyone Jumping On The Netflix Bandwagon Ahead Of Q3 Earnings

Image credit: Matthew Keys, Flickr

Latest Ratings for NFLX

Jul 2018BarclaysMaintainsOverweightOverweight
Jul 2018Bank of AmericaMaintainsBuyBuy
Jul 2018Wells FargoMaintainsOutperformOutperform

View More Analyst Ratings for NFLX
View the Latest Analyst Ratings

Posted-In: Bernstein Netflix Price Increase Netflix Subscribers Todd JuengerAnalyst Color Price Target Analyst Ratings Tech Best of Benzinga


Related Articles (NFLX)

View Comments and Join the Discussion!

The Market In 5 Minutes: Trump Continues Battle With Media, Helios And Matheson's Wild Ride

Lightning Round: Jim Cramer Advises Viewers On Estee Lauder, Macy's And More