Netflix (NFLX) shares have fallen about 10% over the past month, driven by a mid-July sell-off after the company missed revenue guidance expectations. The stock continued its downward trend, dropping roughly 3% in early trading on Monday amid a broader sell-off in Big Tech.
Despite the recent pullback, Jefferies lead analyst James Heaney views the decline as a potential buying opportunity. He believes that Netflix's robust content slate and potential price increases could drive future growth. Heaney points to upcoming series like "Stranger Things 5" and "Squid Game 2," as well as new live sports content, including NFL Christmas Day games and WWE Raw starting in January 2024, as catalysts for increased subscriber growth and revenue.
Heaney predicts that Netflix could see a significant boost in subscribers, with an estimated 7.45 million net additions in Q4, compared to 3.75 million in Q3 and ahead of consensus estimates of 7.2 million.
He suggests that a price hike on Netflix's Standard plan, which currently costs $15.49, is likely in December, especially given the company's recent expansion into live sports. This move is expected to support the ad tier adoption and drive further revenue growth.
Netflix last raised prices for its Standard plan in January 2022 and its Premium tier in October 2022. The ad-supported tier, priced at $6.99 per month, has not seen a price increase yet.
Netflix aims to make its ad business a substantial revenue stream by 2025 and plans to phase out its lowest-priced ad-free streaming plan.
Heaney also notes that the introduction of live sports content will enhance Netflix's pricing power and potentially accelerate ad tier adoption, similar to the impact of Peacock's addition of NFL games. He believes this could lead to improved ad revenue per user (ARPU) for 2025.
In its latest earnings release, Netflix reported steady progress with its ad-supported memberships, growing 34% quarter on quarter.
Netflix co-CEO Greg Peters indicated that pricing decisions for the ad tier would be based on member value and engagement metrics.
Overall, Heaney is bullish on Netflix's prospects, viewing the current stock pullback as a favorable entry point for investors.
Despite the recent pullback, Jefferies lead analyst James Heaney views the decline as a potential buying opportunity. He believes that Netflix's robust content slate and potential price increases could drive future growth. Heaney points to upcoming series like "Stranger Things 5" and "Squid Game 2," as well as new live sports content, including NFL Christmas Day games and WWE Raw starting in January 2024, as catalysts for increased subscriber growth and revenue.
Heaney predicts that Netflix could see a significant boost in subscribers, with an estimated 7.45 million net additions in Q4, compared to 3.75 million in Q3 and ahead of consensus estimates of 7.2 million.
He suggests that a price hike on Netflix's Standard plan, which currently costs $15.49, is likely in December, especially given the company's recent expansion into live sports. This move is expected to support the ad tier adoption and drive further revenue growth.
Netflix last raised prices for its Standard plan in January 2022 and its Premium tier in October 2022. The ad-supported tier, priced at $6.99 per month, has not seen a price increase yet.
Netflix aims to make its ad business a substantial revenue stream by 2025 and plans to phase out its lowest-priced ad-free streaming plan.
Heaney also notes that the introduction of live sports content will enhance Netflix's pricing power and potentially accelerate ad tier adoption, similar to the impact of Peacock's addition of NFL games. He believes this could lead to improved ad revenue per user (ARPU) for 2025.
In its latest earnings release, Netflix reported steady progress with its ad-supported memberships, growing 34% quarter on quarter.
Netflix co-CEO Greg Peters indicated that pricing decisions for the ad tier would be based on member value and engagement metrics.
Overall, Heaney is bullish on Netflix's prospects, viewing the current stock pullback as a favorable entry point for investors.