Netflix (NASDAQ:NFLX) has announced plans to boost prices for basic and premium subscription plans in the U.S., U.K., and France, effective immediately. The move comes after the streaming giant witnessed an impressive 8.76 million jump in paid subscribers in the third quarter following its successful efforts to crack down on password sharing.
NFLX has increased the monthly price of its Premium plan to $22.99 from $19.99 in the U.S. Its Basic plan, which is no longer available to new customers, will now cost the existing users $11.99 compared to the previous price of $9.99. Meanwhile, the company has left prices for its ad-supported and Standard plans unchanged. In the U.K., Netflix is increasing the price of its Premium plan by £2, making it £17.99 per month.
The company is implementing these price increases to enhance its operating profit, targeting a 20% operating profit margin for 2023, which remains at the upper limit of its previously projected range of 18% to 20%. Furthermore, it anticipates operating margin to reach the 22% to 23% range in 2024.
Additionally, the company aims to boost its average revenue per membership (ARM) through price hikes. In the third quarter, the metric fell by 1% year-over-year. Netflix attributed the fall to higher membership growth in countries with lower ARM, limited price increases over the recent months, and some changes in the mix of subscription plans. NFLX expects ARM to improve in 2024 based on higher subscription prices and expected ad revenue growth.
Should You Buy Netflix Stock?
Overall, Netflix stock has a Moderate Buy consensus rating on TipRanks based on 18 Buys, 14 Holds, and one Sell assigned in the past three months. Meanwhile, the average price target of $454.64 implies 31.3% upside potential. The stock has gained about 17% so far in 2023.
