Jefferies thinks Netflix might raise prices by year end helped by ‘impressive content slate’

Jefferies on Monday sounded increasingly bullish on streaming giant Netflix (NASDAQ:NFLX) after a recent +10% pullback in the company’s shares. The research firm thinks the company could possibly raise prices for its streaming plans towards the end of the year on the back of highly anticipated content releases.

Jefferies said price hikes for plans might come in Q4 or December, noting the last price hike on the standard plan was in January 2022. They pointed out that the company’s ad-supported plan remains the cheapest among major players in the industry, and its move into live sports increases pricing power.

“We believe NFLX has been positioning itself throughout this year for a year-end price hike. December/2025 will have major content releases supporting a pricing increase, including the Christmas NFL game, Squid Game 2 on Dec. 26th, WWE Raw starting Jan 2025, and Stranger Things 5 coming in 2025,” Jefferies said in their flash note dated August 5.

The company’s move into NFL at just about 2% of annual content spend is a significant Q4 subscriber driver, creating more tailwind to its password sharing initiative and supporting price hikes, the research firm said.

“In our view, the NFL deal supports our bull thesis that NFLX’s advertising business can help drive sustainable 10%+ rev growth at 25%+ FCF margin. We believe this deal will be highly ROI positive, given the ability to drive not only engagement and revenue but also earnings and FCF,” they added.

Jefferies believes price hikes on standard plans, phasing out basic plans, and the impact of new consistent ad offerings, among others, to be drivers of ARPU into 2025 for NFLX.

NFLX has a “Buy” rating with a $780 PT. Stock is +26% while the benchmark S&P index is +12% so far this year as of Friday’s close.