Netflix (NFLX) shares are down about 10% over the past month, fueled by a mid-July sell-off that came after the company reported revenue guidance that missed Wall Street’s expectations for the current quarter.
Shares have remained under pressure in recent weeks, triggered by a wider sell-off in Big Tech that continued on Monday with the stock falling roughly 3% in early trading.
But one analyst thinks the recent retreat has created a buying opportunity, arguing the company is well positioned to hike subscription prices later this year.
“We are increasingly bullish on the recent 10%+ pullback in the stock, as we believe a Q4 US price hike is possible on the back of an impressive content slate,” Jefferies lead analyst James Heaney wrote in a note to clients on Monday.
Heaney called out upcoming series like “‘Stranger Things 5” and “Squid Game 2,” along with the recent acquisition of live sports content like the NFL Christmas Day games and WWE Raw, which will kick off in January 2024.
The combination of that strong content slate along with potential price increases “could serve as a catalyst for ad tier adoption,” he said, predicting a likely boost to year-end subscribers.
“We expect NFLX to accelerate subscriber growth in Q4 leading us to +7.45 million net adds (vs +3.75 million in Q3) and ahead of consensus estimates of +7.2 million,” the analyst said.
Netflix last hiked the price of its popular Standard plan in January 2022, upping the cost to $15.49 from the prior $13.99. It also raised the price of its Premium tier by $2 to $19.99 a month at the time before hiking the cost of that plan once again in October to $22.99.
The company has yet to raise the price of its ad-supported offering, introduced less than two years ago, which remains one of the cheapest ad plans among all of the major streaming players at a price point of $6.99 a month.
Netflix has previously said its goal is to make ads “a more substantial revenue stream that contributes to sustained, healthy revenue growth in 2025 and beyond.” It will phase out its lowest-priced ad-free streaming plan as a result, making the $15.49 Standard plan its lowest-priced offering for ad-free experiences.