Please ensure Javascript is enabled for purposes of website accessibility

Why Netflix Stock Jumped Today

By Joe Tenebruso – Updated Oct 5, 2020 at 2:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Brand strength and price hikes could drive the streaming titan's shares higher.

What happened

Shares of Netflix (NFLX -2.25%) rose 5.5% on Thursday, following news that the streaming leader's brand got a big boost during the coronavirus pandemic, as well as rumors it was considering price increases.

So what 

A recent study by the branding agency MBLM showed Netflix received the third-highest increase in usage during the COVID-19 crisis, behind only video conferencing specialist Zoom Video Communications and sanitizer leader Purell. 

MBLM surveyed 3,000 U.S. consumers regarding their experiences with 100 brands across 10 industries. "Brands drive business, and they in turn are the fuel of our economy," MBLM managing partner Mario Natarelli said in a press release. "As we look to recovery, we wanted to reveal which brands consumers are bonding with now and why."

MBLM will release the full results from its Brand Intimacy COVID Study next week.

A person is pointing to an upwardly sloping digital chart.

Netflix's stock rose sharply on Thursday. Image source: Getty Images.

MBLM's study follows comments from Jefferies analyst Alex Giaimo earlier in the week suggesting that Netflix may soon raise its subscription prices. Giaimo estimates that the streaming giant could generate as much as $1 billion in additional revenue by increasing its prices by $1 to $2 in either its North America segment or its Europe, the Middle East, and Africa (EMEA) segment. 

Now what

MBLM defines brand intimacy as "the emotional science behind the bonds we form with the brands we use and love." With Netflix's brand intimacy as high as its ever been, thanks in part to the COVID-19 crisis, the company could likely raise prices without suffering much in the way of subscriber losses. In turn, most of the additional revenue produced from a potential price hike could fall to its bottom line, boosting its stock price in the process.

Editor's note: This article has been corrected to state that Netflix received the third-highest increase in usage during the COVID-19 crisis, behind  Zoom Video Communications and Purell. 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Zoom Video Communications. The Motley Fool has a disclosure policy.

Stocks Mentioned

Netflix Stock Quote
Netflix
NFLX
$305.56 (-2.25%) $-7.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.