MORGAN STANLEY: Netflix is benefiting from a virtuous circle (NFLX)

pulse

October 13, 2017 1:50 PM

Netflix has more 'pricing power' now, and it's great news for its stock price, a Morgan Stanley analyst finds.

It's a virtuous circle.

Netflix has moved to raise prices on its subscription plans, which will give it the resources to push further into global markets and expand its exclusive content. That, in turn, is likely to increase its pricing power even further.

That's the crux of a research note from Morgan Stanley's Benjamin Swinburne. The analyst lifted his price target for the company to $225 from $195, a 15% increase.

This month, the company announced that it will raise prices on its standard and premium plans, and $13.99 from $11.99, respectively.

"Netflix's recent price increases in the US and abroad are a positive indication of its confidence in the subscriber opportunity ahead and should help fuel content investments for future growth," Swinburne wrote.

Netflix's high-quality content gives its pricing power an additional boost. Swinburne points out that Netflix has enjoyed a seasonally strong quarter for viewership and that its slate of content for the fourth quarter is also promising, with "Stranger Things," "The Crown," and "Punisher" coming to viewers soon.

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