TheStreet
Netflix (NFLX) – Get Free Report shares soared higher in early Thursday trading after the streaming service added nearly 9 million new subscribers over the third quarter, and unveiled a series of new price hikes, as it looks to augment crackdown on password sharing with expanded revenue prospects.
Netflix also said it would lift prices fir its subscription in key markets, including the U.S., the U.K. and Canada, taking the basic U.S. price to $11.99 and the premium plan to $22.99. Ad-tier pricing, Netflix said, will remain unchanged, with the aim of offering a lower entry-point for new subscribers are its ramps-up the surcharge for household password sharing.
The price hike reflect Netflix’s confidence in building on its 246 million global subscriber base, after adding 8.76 million new customers over the quarter, the strongest gain of the year that smashed Street forecasts even amid a dearth of new original programing owing to the ongoing Screen Actors’ Guild strike.
Netflix also suggested they could add a similar amount over the final three months of the year, while lifting its free-cash flow guidance.
Profits for the three months ending in September were pegged at $3.73 per share, up 20.3% from the same period last year and well ahead of the Street consensus forecast of $3.49 per share.
“While delivering nicely stronger than expected subscriber growth (the key to the Netflix flywheel) the company is also clearly demonstrating its scale highlighted by continuing expanding operating margins and $6.5 billion in ’23 free cash flow and guidance for continued expanding operating margins in 2024,” said Pivotal Research Group analyst Jeffrey Wlodarczark, who carrries a ‘buy’ rating with a $600 price target on the stock, the highest on Wall Street.
“Netflix is clearly dominating the global streaming market that we do not believe is properly reflected in its current market valuation,” he added. “
Netflix shares were marked 13.4% higher in pre-market trading to indicate an opening bell price of $392.50 each.
The pricing changes are likely to offset some of the concern investors took from comments made by CEO Greg Peters at a Goldman Sachs media conference last month, when he appeared to prioritize market share growth over profitability.
“Our primary financial metrics are revenue for growth and operating margin for profitability. Our goal is to accelerate revenue growth, expand operating margin and deliver growing free cash flow,” Netflix said in its shareholder letter. “Nine months through the year, we are well positioned to meet these objectives in 2023.”
“In addition to building engagement by creating movies and series that members will love, we’re also focused on improving monetization through a combination of paid sharing, scaling our ads business and increased sophistication around our pricing and plans,” the company added.
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