Shares of Netflix (NFLX) have fallen about 10% over the past month, fueled by a sell-off in mid-July that came after the company reported revenue expectations that missed Wall Street expectations for the current quarter.
Shares have remained under pressure in recent weeks, driven by a broader sell-off in Big Tech that continued Monday, with the stock down about 3% in early trading.
But one analyst thinks the recent downturn has created a buying opportunity, arguing the company is well positioned to raise subscription prices later this year.
“We are increasingly optimistic about the recent share price decline of more than 10% as we believe a US price increase in the fourth quarter is possible on an impressive table of contents,” Jefferies chief analyst James Heaney wrote in a note on Monday to customers.
Heaney mentioned upcoming series such as “Stranger Things 5” and “Squid Game 2,” along with the recent acquisition of live sports content such as the NFL Christmas Day games and WWE Raw, set to launch in January 2024.
The combination of that strong content along with potential price increases “could serve as a catalyst for ad tier adoption,” he said, predicting a likely boost to year-end subscriber numbers.
“We expect NFLX to accelerate subscriber growth in Q4, leading us to +7.45 million net additions (vs. +3.75 million in Q3) and ahead of consensus estimates of +7.2 million,” the analyst said.
Netflix has most recently increased the price of its popular Standard plan in January 2022, increasing the cost from $13.99 to $15.49. It also increased the price of its Premium tier by $2 to $19.99 per month at the time, before raising the cost of that plan again to $22.99 in October.
The company has yet to increase the price of its ad-supported offering, which was introduced less than two years ago and remains one of the cheapest ad plans among all the major streaming players at $6.99 per month.
Netflix has previously said The goal is to make advertising “a more substantial revenue stream that will contribute to sustainable, healthy revenue growth in 2025 and beyond.” As a result, it will phase out its cheapest ad-free streaming plan, making the $15.49 Standard plan the cheapest offering for ad-free experiences.
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