Netflix Raising Prices In US and Canada, Stock Slumping

Price Increase Notably Larger Than October 2020

Netflix (NFLX) announced an 11% price increase for its three subscription plans in US and Canadian markets. The streaming giant’s most recent price hike came in October 2020 when the cost of two plans rose about 8%. Analysts note Netflix is expected to miss earnings projections for Q4 2021 as the stock price has slumped amid lagging subscriber growth.

Analysts point out the US and Canadian market is vital for Netflix, representing 44% of company revenue despite comprising just 35% of all subscribers. In comparing the two companies’ most expensive plans, Netflix now charges 33% more than HBO Max. Meanwhile, HBO Max parent company AT&T (T) is offering first-year subscribers a 20% discount.

Netflix Continued to Soar Following Previous Price Hikes

After Netflix announced the pricing increase late last week, shares initially jumped 1%. Still, analysts have been down on the stock recently. Dating back to the start of the year, Netflix shares have lost close to 14% as part of an overall downward trend for tech stocks thus far in 2022.

Netflix proponents note the streaming giant has successfully weathered price increases before, with subscriber growth largely unaffected as a result. Some observers tie this to the company’s “first-mover” advantage in shifting its subscriber model from DVD home delivery to streaming, leading to longstanding customers. However, the stock’s 2021 gains lagged behind the Nasdaq Composite Index and S&P 500, underscoring diminished optimism among investors.

Subscriber Growth Slowdown and Price Increase Has Some Investors Worried

The earliest days of the pandemic led to robust growth for Netflix, and analysts describe 2021 as a bit of a pullback for the company. Some also predict Netflix will fall short of Q4 predictions that foresaw 8.5 million net new subscribers. Analysts cite weaker-than-expected app downloads among other ongoing consumer trends in describing the overall concern.

In fact, some investors believe Netflix may have already maxed out in terms of the subscriber growth rate. Analysts note the streaming service continues to add new content without a corresponding uptick in subscribers. This includes the Q4 2021 releases of Red Notice and Don’t Look Up, which have since broken viewership records. Overall, executives are counting on this latest price increase to boost revenue without majorly impacting subscriber growth.

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