Netflix Rally Continues as Wall Street Cheers Its Pricing Power
(Bloomberg) -- Netflix Inc. raised its U.S. prices for the first time since 2017, sending the shares higher as investors anticipate more revenue for the streaming giant.
The stock rose as much as 6.8 percent to $355.50 in New York after Netflix said its most-popular plan would increase to $13 a month as of Tuesday from $11. The shares had already been on a tear, up more than 40 percent since Christmas Eve after drifting lower from a June record.
Investors are showing confidence that Netflix subscribers will continue to pay up for the company’s original programming and library of movies and shows -- even if they need to dig down for a few more dollars a month. While subscriber growth slowed after a 2015 price increase, a 2017 increase didn’t cause a blip as Netflix added 24 million customers that year.
That bodes well for the company, since its vast spending on original productions like “Stranger Things,” “The Crown” and current buzz magnet “Tidying Up With Marie Kondo” shows no signs of letting up. Netflix said in October it expected to burn through about $3 billion in cash for 2018.
“We change pricing from time to time as we continue investing in great entertainment and improving the overall Netflix experience for the benefit of our members,” Netflix said in an emailed statement Tuesday.
The price hike is the largest since Netflix launched its streaming service 12 years ago and marks the first time an increase will hit all 58 million U.S. subscribers, the Associated Press reported.
The move came as Goldman Sachs analysts said they expect Netflix to issue strong fourth-quarter results and first-quarter guidance on Thursday.
Netflix’s most popular plan offers high-definition service on up to two devices simultaneously. The company also raised the monthly price of its standard-definition plan for the first time since it started streaming-only service in 2010, to $9 from $8. The company’s highest-tier plan, with Ultra HD and other enhancements, rose to $16 from $14.
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