- Netflix (NASDAQ:NFLX) soared to the top of the S&P 500 in yesterday’s trade, advancing 5.4% to a new all-time high after announcing an upcoming price bump for its U.S. streaming services.
- Analysts say NFLX subscribers are not likely to cancel in droves as they have in response to some previous price increases because the service now offers more content and is cheaper than many new rivals.
- NFLX’s "pricing power has increased materially over the past few years as their content slate and technology has improved,” says RBC analyst Mark Mahaney. “The content, not price, is the leading churn/churn-back factor among Netflix subs.”
- The higher pricing comes as NFLX spends heavily on original content and expanding outside the U.S., committing more than $6B this year on original shows.
- The rub is that NFLX must keep producing more expensive hits like Stranger Things that attract viewers "but also consume the company’s free cash flow and add to its growing debt load."
- Meanwhile, Wells Fargo (NYSE:WFC) analysts see good news for Disney (NYSE:DIS), believing NFLX's price hike supports its model for the Disney-branded streaming app and suggests potential upside for DIS shares.
- Now read: A Bet On Netflix Is Not A Bet Against Market Forces
Original article