Goldman Sachs Says Netflix (NFLX) Price Hikes Will More Than Offset Churn
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Rating Summary:
57 Buy, 26 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 20
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Goldman Sachs commented on Netflix (NASDAQ: NFLX) following yesterday's price hike news, saying the price increase should more than offset resulting higher churn.
The firm said with a 60% price increase, lower-priced hybrid subs are being forced to make a decision about how import the DVD option is. They expect the vast majority of high-priced subs staying put and paying 20-30% increases.
The move should benefit gross margins as a majority of lower-priced subs were less profitable for Netflix, Goldman notes.
"We expect those lower-priced hybrid subs who were turning around a high number of DVDs (very unprofitably) will churn off and those lower-priced hybrid subs that were not active to now go to streaming only, which has very high incremental margin given low variable costs," said analyst Ingrid Chung.
Chung said a "very high number" of subscribers would have to cancel to offset the positive impact from the price increase.
She expects the company will provide more details with earnings on July 25.
For more ratings news on Netflix click here and for the rating history of Netflix click here.
Shares of Netflix are up 2.7% in pre-open action to $299.
The firm said with a 60% price increase, lower-priced hybrid subs are being forced to make a decision about how import the DVD option is. They expect the vast majority of high-priced subs staying put and paying 20-30% increases.
The move should benefit gross margins as a majority of lower-priced subs were less profitable for Netflix, Goldman notes.
"We expect those lower-priced hybrid subs who were turning around a high number of DVDs (very unprofitably) will churn off and those lower-priced hybrid subs that were not active to now go to streaming only, which has very high incremental margin given low variable costs," said analyst Ingrid Chung.
Chung said a "very high number" of subscribers would have to cancel to offset the positive impact from the price increase.
She expects the company will provide more details with earnings on July 25.
For more ratings news on Netflix click here and for the rating history of Netflix click here.
Shares of Netflix are up 2.7% in pre-open action to $299.
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