Netflix 'The Ultimate Beneficiary' Of Streaming Shift: Analyst Highlights Subscription Price Increase As Big Catalyst

Streaming giant Netflix Inc NFLX ended the fourth quarter (Q4) with 260.28 million global paid subscribers.

An analyst sees a pending price increase for subscribers in 2024 as a potential catalyst.

The Netflix Analyst: UBS analyst John Hodulik maintains a Buy rating on Netflix and raises the price target from $570 to $685.

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The Analyst Takeaways: An expected price increase for Netflix subscribers in 2024 could help boost revenue and earnings growth for the company, Hodulik said.

"We expect to see rate increases this year," Hodulik said, as shared by Variety.

The analyst said the combination of price increases for subscribers along with growth of Netflix's ad-supported tier could help power revenue growth for the company to 15% in 2024. That would mark an increase over 7% growth witnessed in 2023 for the streaming company.

Netflix raised its prices for several plans in October and recently hinted at a 2024 price increase being imminent.

Netflix previously put price increases on hold as it rolled out its ad-supported plan, which marked "a form of substitute price increase," Netflix CEO Greg Peters said after fourth-quarter results.

Peters said the company can now resume its "standard approach" when it comes to price increases and it will monitor countries and how much entertainment value it has to customers validating price increases.

Netflix will "ask (customers) to pay a bit more to keep that positive flywheel going and we can invest in more great films, series and games for those members."

The analyst said the price increases from Netflix come as the company has strong pricing power given its lower price per hour consumed compared to rival streaming platforms. Nielsen data cited by Hodulik said Netflix's share of U.S. TV viewing was 7.9% in January 2024, compared to 7.7% in December 2023.

Netflix could also have an edge against competitors with its already profitable platform, the analyst added.

"As the objective in streaming shifts from subscriber growth to profitability for the traditional media companies, we see Netflix as the ultimate beneficiary of this industry rationalization."

Hodulik expects Netflix to add 20 million net new subscribers in 2024, raising a previous estimate of 18 million net subscriber adds. Netflix added 29.5 million net new subscribers in 2023, including 13.1 million in the fourth quarter.

"While we expect net adds to slow, we believe Netflix still has significant runway as it continues to convert users to paid subs and attracts new cohorts."

NFLX Price Action: Netflix shares trade at $597.41 versus a 52-week trading range of $285.33 to $605.36. Shares of the streaming company are up 85% over the last year.

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