Jefferies says survey supports view that Netflix can raise prices in international markets with limited churn
Jefferies analyst Alex Giaimo raised his price target on Netflix (NFLX) to $570 as he believes a potential price hike is probable in the near- to mid-term after the company softened its language toward a possible increase with its second quarter earnings call. Still bearish on the name, his peer at Benchmark lowered the firm's target on Netflix's shares, saying the market continues "overestimating" the company's sustainable "dominance" in the global streaming market.
POTENTIAL PRICE HIKE: In a research note to investors, Jefferies analyst Alex Giaimo raised his price target on Netflix to $570 from $550, while keeping a Buy rating on the shares. The analyst believes a potential price hike is probable in the near- to mid-term after the company softened its language toward a potential increase with its second quarter earnings call. Giaimo pointed out that Netflix could add $500M-$1B to fiscal year 2021 revenue based on a $1- $2 increase in either North America or the EMEA region.
The analyst added that he has confidence Netflix can raise prices in international markets given its deepening content library and "outsized consumer value proposition." Past price hikes have resulted in sustained revenue growth with limited churn, Giaimo contended, adding that his global June 2020 survey supports his view that Netflix can raise prices in international markets with limited churn.
TARGET PRICE CUT: Still bearish on the stock, Benchmark analyst Matthew Harrigan lowered the firm's price target on Netflix to $420 from $425 and kept a Sell rating on the shares, citing his view that the market continues "overestimating" Netflix's sustainable total category dominance relative to its global streaming total addressable market.
Original programming production from Disney+ (DIS), Hulu, Amazon Prime (AMZN), and HBO Max (T) is "apt to be of comparable and sometimes higher quality than Netflix programming - if lower volume," Harrigan argued. The analyst also added that "even marquee Netflix creator Ryan Murphy" is seeing "mixed critical and viewing success with high profile shows like Ratched." Nonetheless, Harrigan noted that he does not expect lasting U.S. cancellation fallout from the "Cuties" controversy.
PRICE ACTION: In morning trading, shares of Netflix are fractionally down at $481.55.
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