streaming giant Netflix Inc. (NASDAQ:NFLX) ended its fourth quarter (Q4) with 260.28 million paid subscribers worldwide.
Analysts see a pending price increase for subscribers in 2024 as a potential catalyst.
Netflix Analyst: UBS analyst John Hodulyk gave Netflix a Buy rating and raised his price target from $570 to $685.
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Analyst points: Khodulyk said the expected price increases for Netflix subscribers in 2024 could drive revenue and profit growth for the company.
“We expect a rate hike this year,” Hodulyk said, as reported by Variety.
The analyst said the combination of subscriber price hikes and growth in Netflix’s ad-supported tier could drive the company’s revenue growth to 15% in 2024. This would represent more than 7% growth for the streaming company in 2023.
Netflix increased prices on some of its plans in October and recently hinted that a 2024 price increase was imminent.
Netflix previously held off on price increases as it rolled out ad-supported plans, but Netflix’s CEO said this was “a type of fallback price increase.” Greg Peters He spoke after the fourth quarter results.
Mr Peters said the company could now resume a “standard approach” to price increases and would monitor each country to see how much entertainment value they had for customers validating price increases.
Netflix “to maintain a positive flywheel, we’re asking[customers]to pay a little more so we can invest in more great movies, series, and games for those members.”
The analyst said Netflix’s price increases are due to the company’s strong pricing power, with lower prices per hour consumed compared to competing streaming platforms. Netflix’s share of U.S. TV viewing was 7.9% in January 2024, compared with 7.7% in December 2023, according to Nielsen data cited by Khodulyk.
Netflix could also gain an advantage over competitors on a platform where it is already profitable, the analyst added.
“We see Netflix as the ultimate beneficiary of this industry streamlining, as the goal of streaming shifts from subscriber growth to profitability for traditional media companies.”
Khodryk expects Netflix to add 20 million net new subscribers in 2024, upping its previous forecast for net subscriber growth of 18 million. Netflix added 29.5 million net new subscribers in 2023, including 13.1 million in the fourth quarter.
“While we expect net additions to slow, we believe there is still significant growth ahead as Netflix continues to convert users to paid subscribers and attract new demographics.”
NFLX Price Action: Netflix stock is trading at $597.41, while its 52-week trading range is $285.33 to $605.36. The streaming company’s stock is up 85% over the last year.
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