Does Netflix’s Price Hike Increase Its Value?
Last week, Netflix (NASDAQ: NFLX) announced it was hiking prices. While the move may be jeered by its 100 million-plus subscribers, it was cheered by Wall Street, as the stock appreciated 7.4% by the end of the week.
The move seemed to surprise people -- not because Netflix raised prices, as its high multiple always implied further price increases were possible -- but rather, how soon the hikes came after the last one which was just in the Spring of 2016.
Over the summer, I postulated Netflix's intrinsic value using some very general assumptions. One can only guess as to Netflix's true potential, as the worldwide streaming market is vast, and Netflix's management has a history of blowing past expectations. Now that Netflix is jumping on the price hike-train sooner than I thought, it's quite possible the company will be more profitable than I assumed, especially when one looks to 2025. Here's how the new hikes affect my value assumptions.
Source: Fool.com