Netflix (NFLX) Stock Up, Piper Jaffray: Price Hikes Will Have ‘Minimal Impact’
NEW YORK (TheStreet) -- Shares of Netflix (NFLX) - Get Report are increasing 1.4% to $96 late Tuesday morning as Piper Jaffray said price increases will have a "minimal impact" on the company's overall subscriber base, Barron's reports.
The firm surveyed 1,500 U.S. Netflix subscribers to assess their reaction to the streaming service's price hikes moving forward.
The survey "suggests approximately 3%-4% may cancel due to the price increase faced by long-term subscribers who are being transitioned to $9.99/month this year. This would be a negative impact of 2%-3% on the worldwide streaming sub base of ~80 million," Piper Jaffray wrote in a note cited by Barron's.
Despite the recent price increase, more than half of U.S. subscribers would be willing to pay significantly more to remain subscribers of the service, according to the firm.
Fifty-five percent of subscribers indicated they would not cancel Netflix until it reaches a price of more than $15 per month.
"It's also important to keep in mind that with pricing related surveys (for any product/service) responses are typically more negative than reality as customers typically suggest a lower willingness to absorb a higher price than what they're actually willing to do in the event of raised prices," Piper Jaffray noted.
"The bigger impact on NFLX shares from ungrandfathering may simply be the cloud that it casts over the stock as investors remain concerned about potential negative impact to churn in the coming months," the firm added.
Piper Jaffray also reiterated an "overweight" rating and $122 price target on the stock.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C+ on the stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and solid stock price performance.
But the team also finds weaknesses including generally higher debt management risk, disappointing return on equity and weak operating cash flow.
You can view the full analysis from the report here: NFLX