Netflix Set To Capitalize On Ad-Supported Tier, Price Increase: Analyst Says Streamer 'Boasts Pricing Power' Ahead Of Q3 Earnings

Benzinga · 10/14 18:36

Streaming giant Netflix Inc (NASDAQ:NFLX) has gotten price target increases from analysts thanks to ad-supported strength and pending pricing increases, with the upcoming catalyst of third-quarter financial results coming Thursday


The Netflix Analysts: Goldman Sachs analyst Eric Sheridan reiterated a Neutral rating and raised the price target from $659 to $709.

Macquarie analyst Tim Nollen reiterated an Outperform rating and raised the price target from $695 to $795.

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Goldman Sachs on NFLX: Ad-supporting initiatives and a new pricing strategy will impact average revenue per member for Netflix moving forward, Sheridan said in a new investor note.

"On the back of their last earnings report, the shares had an initial negative reaction but have since produced such outperformance on the back of a few key themes," Sheridan said.

The analyst said Netflix’s market leadership in streaming, increasing progress on the ad-supported tier, and focus on profits over growth are key factors that have helped its stock climb since its second-quarter financial results.

Sheridan added that price increases over the next year and subscriber growth remain two key debates among investors regarding Netflix stock.

"We increase our net add assumptions in all markets to reflect solid third-party data trends."

The Neutral rating comes with Netflix shares up over 45% year-to-date, outperforming the 20% gain of the S&P 500. The analyst said Netflix stock trades with "a host of positive operating cadence in 2025 and 2026 at current levels."

Macquarie on NFLX: Nollen is bearish on traditional media stocks and has Outperform ratings on several streaming pure plays, including Netflix.

"Netflix has continued to power ahead, in anticipation of a possible price increase in the U.S.," Nollen said.

The analyst said positive updates on the company's ad-supported tier and enthusiasm for live sports are also helping the company for the near-term outlook.

"Ad tech integrations and the construction of an in-house data stack and audience graph should produce good advertising growth over the next two years, if not immediately."

Advertising monetization could take time, the analyst cautions.

Nollen said a pricing increase could be one of the company's biggest catalysts. The last price increase on the standard plan came in January 2022, and Hulu and Max are now more expensive than Netflix's standard plan.

"We think Netflix boasts strong pricing power."

NFLX Price Action: Netflix stock is down 1.5% to $711.86 on Monday, versus a 52-week trading range of $344.73 to $736.00. Netflix stock is up 52.7% year-to-date in 2024.

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