Netflix (NFLX) - Get Report may increase its subscription costs by $1 or $2 in all four of its geographies as it is expected to generate $500 million to $1 billion in extra sales in 2021, according to a note by Jefferies analyst Brent Thill.
A price hike may cause the streaming company to lose some subscribers, according to Thill, in some international markets.
Thill raised Netflix’s price target to $570 from $500 and believes that Netflix will deliver normalized high double-digit top-line growth with sizable margin expansion over time.
He added that the biggest challenge is valuation, but he forecasts a significant long-term upside and sustainable high-quality fundamentals.
In June, Thill cited a new survey of Netflix users to conclude that the streamer has an opportunity to raise prices in international markets.
Thill surveyed 1,470 Netflix subscribers in the United States, the United Kingdom, and India. His findings revealed that 90% of Indian subscribers and 70% of U.K. subscribers are willing to pay extra costs for the service, while subscribers in the United States are “more tapped out” on the pricing front.
In January, Netflix increased its prices for its streaming service to $13 from $11 for the average monthly plan and increased prices for its cheap plan to $9 from $8 a month. The high-end monthly plan went from $14 to $16.
Netflix revenue for the 12 months ending in June was $22.62 billion.
Earlier this month, Netflix announced changes in its senior ranks as original content head Cindy Holland was replaced by Bela Bajaria who will oversee all original series for Netflix globally come October.
On September 1, shares of Netflix rose after an RBC note estimated the streaming service could reach 500 million subscribers by 2030 from 193 million today. RBC analyst Mark Mahaney raised his price target by 15% to $610 a share and affirmed an outperform rating.
Netflix shares are up 49% year-to-date, outperforming the Nasdaq Composite’s 22% gain, according to Yahoo Finance.