Please ensure Javascript is enabled for purposes of website accessibility

Why Netflix Stock Popped 6% Today

By Rich Smith – Oct 29, 2020 at 5:36PM

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

A price hike for Netflix customers delivers a price pop to Netflix investors.

What happened

Netflix (NFLX -0.27%) is raising prices. And while that may not sound like good news to Netflix users, investors in Netflix stock apparently liked the news -- a lot.

In Thursday trading, shares of the streaming TV star surged nearly 6% at one point, before relaxing to close the day up 3.7%.

NETFLIX red logo on white background

Image source: Getty Images.

So what

Netflix is hiking rates on two of its three streaming tiers. Basic access (watch one screen at a time in standard definition only) will remain priced at $8.99 per month, reports The Verge today. However, the company's standard plan (two screens, full HD) will jump $1 to $13.99, and the premium tier (up to four screens' access at Ultra HD resolution) will rise $2 to $17.99.  

According to Netflix, the standard plan is the company's most popular, so the $1 price hike there is likely to have the greatest benefit on Netflix's bottom line.

Now what

Will the price hike stick in an era when there are multiple streaming options to choose from -- Disney, Hulu, and HBO Max to name just a few? Will customers rebel and cancel their subscriptions?

I'd bet it will -- and they won't. Worst case, Netflix might see an increase in customer churn as price-savvy consumers temporarily shelve their Netflix subscriptions in favor of the second season of The Mandalorian on Disney+ -- then continue cycling through each service seriatim as they search for new content. In the end, though, discretionary consumer dollars will return to Netflix when it debuts its next "must watch" series (whatever that may be).

They always do.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix. The Motley Fool has a disclosure policy.



Premium Investing Services

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