Analyst Note| Neil Macker, CFA |
Netflix raised prices on its two most popular plans in the U.S. on Oct. 30 as the firm looks for ways to grow revenue in the face of slowing subscription growth in its single biggest market. The price of the firm’s standard plan will increase by $1, to $14 per month, and the premium plan will rise by $2, to $18 per month. The firm decided to not increase the price on its cheapest plan at $8 per month. The increase is the fifth for the standard plan, which debuted in November 2010 at $8 per month. While Netflix waited for three and a half years to enact its first price hike on the standard plan, this increase is the third in just three years. The increases in the United States and other developed markets will help offset the impact of lower-price plans in newer, emerging economies like India and Indonesia. We have slightly increased our estimate for 2021 monthly average revenue per user in the U.S. region as we previously expected a price hike later in 2021 and expected a uniform $1 increase. However, we are maintaining our $200 fair value estimate for Netflix, as our long-term pricing assumptions remain intact, based on the multitude of streaming options that have emerged in the U.S. market.