Netflix is ramping up its live sports programming to boost its fledgling advertising business. But the move could lead to higher subscription prices, an analyst says. Meanwhile, Netflix stock is in a bullish chart pattern, despite a recent decline.
In a client note Monday, UBS analyst John Hodulik suggested that Netflix might look to increase subscription prices to match the higher usage of its service due to live sports.
"At the recent UBS Media and Communications conference, Co-CEO Ted Sarandos tied future price increases to increased engagement and improved overall value to members, including through marquee live events," Hodulik said. "With the recent focus on paid sharing, Netflix has not raised the price of the Standard U.S. plan since early 2022."
A price increase in line with historical changes across the ad-free plans would drive an estimated $1 billion in incremental annual revenue for Netflix, he said.
Hodulik rates Netflix stock as buy with a price target of 1,040.
On the stock market today, Netflix stock dropped 1% to close at 891.32. Its shares have fallen for four straight trading sessions.
However, Netflix stock has formed a three-weeks-tight pattern with a buy point of 941.75, according to IBD MarketSurge charts. That entry point is also the stock's all-time high, reached on Dec. 11.
On Friday, Netflix reported strong viewership numbers for its Christmas Day NFL football games and Beyoncé halftime show. The streaming video leader said its two NFL games reached nearly 65 million viewers in the U.S. alone, according to Nielsen.
On Tuesday, Netflix announced that viewers from 218 countries and territories tuned in to watch at least one of the games. The Chiefs-Steelers game drew an average minute audience of 30 million global viewers, while the Ravens-Texans game attracted an average global audience of 31.3 million.
Netflix Stock Is On Two IBD Lists
"The notion of more major sports migrating over time to streaming was bolstered by Netflix's solid performance on Christmas Day streaming two NFL games," Rosenblatt Securities analyst Barton Crockett said in a report Monday.
Crockett rates Netflix stock as neutral with a price target of 680.
The economics of the NFL games look constructive for Netflix, Crockett said.
"It's reasonable to assume that Netflix came close to covering the $75 million it paid in license fees for each game, plus other expenses," including a reported $20 million cost for the Beyonce concert, he said.
"The upside of the game is exposure for Netflix and its other content (including the WWE and Squid Game content that was promoted during the game) and subscriber additions," Crockett said.
In addition to the NFL games, Netflix recently secured the exclusive U.S. rights to broadcast FIFA's Women's World Cup in 2027 and 2031.
Netflix stock is on two IBD lists: IBD 50 and Big Cap 20.
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