Netflix Inc. (NASDAQ:NFLX) shares have declined by approximately 10% over the past month, driven by a sell-off in mid-July following the company’s revenue guidance, which fell short of Wall Street’s expectations for the current quarter.
The stock has remained under pressure recently, exacerbated by a broader sell-off in Big Tech that continued on Monday, with Netflix shares dropping about 3% in early trading.
However, one analyst views this pullback as a buying opportunity, suggesting that the company is well-positioned to increase subscription prices later this year. Jefferies lead analyst James Heaney expressed increased optimism about the recent decline, highlighting a potential price hike in Q4 due to an impressive content slate.
Heaney pointed to upcoming series such as “Stranger Things 5” and “Squid Game 2,” and the acquisition of live sports content, including the NFL Christmas Day games and WWE Raw, starting in January 2024. The strong content lineup and potential price increases could drive ad tier adoption, he noted, predicting a boost in year-end subscribers.
Jefferies expects Netflix to accelerate subscriber growth in Q4, forecasting 7.45 million net additions compared to 3.75 million in Q3 and surpassing consensus estimates of 7.2 million.
Netflix last increased the price of its Standard plan in January 2022, raising it to $15.49 from $13.99. The Premium tier also saw a price hike to $19.99 monthly, which was later increased to $22.99 in October. The ad-supported plan introduced nearly two years ago, remains among the cheapest at $6.99 monthly.
The company aims to make ads a significant revenue stream for sustained growth in 2025 and beyond, phasing out its lowest-priced ad-free plan and making the $15.49 Standard plan the cheapest option for ad-free streaming.
Jefferies anticipates a December price hike for the Standard plan, particularly with Netflix’s recent entry into live sports, which is expected to enhance its pricing power. The analyst compared Netflix’s strategy to Peacock’s success, which saw a 3 million subscriber increase in the first quarter after airing an NFL Wild Card game.
The NFL games are expected to provide advertisers with insight into Netflix’s scale, potentially accelerating ad tier adoption and driving ad ARPU growth for 2025. Netflix has reported progress in scaling its ad business, with ad-tier memberships growing 34% quarter on quarter, aided by the removal of the basic plan in certain markets.
Netflix Co-CEO Greg Peters mentioned that pricing decisions for the ad tier are approached similarly to those for the non-ad tiers. The focus remains on enhancing value for members, with potential price increases considered when supported by acquisition, engagement, retention, and churn metrics.
Featured Image: Megapixl
Author Faith Yakubu 
