As inflation continues to soar, you're not alone if you're searching for stocks with resilient pricing power during this turbulent period. In this segment of Backstage Pass, recorded on Jan. 14, Fool contributors Toby Bordelon and Connor Allen discuss several companies demonstrating pricing power right now, including a well-known semiconductor stock that can make investors richer in 2022 and beyond.
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Toby Bordelon: Netflix is raising prices for the North American plans. You can go to the website if you want to get the details. The gist of it is the lowest-tier basic plan is going up $1. That's going to be $9.99 a month now. This is just in North America for now. The standard plan is going up a $1.50 to $15.49, and the premium plan will be going up $2 to $19.99. Price increases across the board for Netflix.
Actually, when I get my Netflix plan, I pay a little bit for it but it's part of our T-Mobile plan. T-Mobile basically will give you the standard Netflix plan for free and you can add like two bucks and maybe the premium plan.
I don't know what they're going to do. I don't know if they are going to continue that, or am I going to have to pay a little bit more for that? We will see. That will be interesting to me.
Connor Allen: Quick question. Are these plans [distinguished by] just the amount of users allowed to be on Netflix? Is that all it is? Or is there major differences? Do you have any idea?
Toby Bordelon: Like between the basic and the standard? I'm not sure. I know the premium plan includes 4K streaming. I don't think the basic plan includes that, but I know there are also simultaneous streams I think that differentiate that. But I don't know 100% what all the differences are.
But I do know the reason we went actually for the premium was because of the 4K streaming, in part. I don't know if this will mean some people downgrade, too. Maybe you're going to go down a level.
Potentially you want to see how this all shakes out. But you talk about pricing power, man, especially at that high end, if that's 20 bucks a month for video streaming, that seems like pricing power to me. I just want to go with this, guys. I want to ask you your thoughts on this. What does pricing power mean to you, and give us another company that you think has major pricing power besides Netflix, someone else who might get into something like this. Kick us off, Connor.
Connor Allen: I think a good analogy of what pricing power is, is the fact that [GlaxoSmithKline's] Advil is still around. The actual brand, Advil, because you can go to your local Walgreens, you can go to your local CVS, and you can get the CVS brand for almost half the price in some cases. But you still have people buying Advil. That brand recognition gives them some pricing power to keep that price up there.
That would be my, I guess, analogy there. What was the next question? Another company that I think has some strong pricing power, and that would have to be TSMC [Taiwan Semiconductor Manufacturing Company] (TSM -0.24%). I think last August they announced a price hike on all their advanced chipmaking. This includes Apple's N1 chip.
This includes all of their top-tier chips that they are building and manufacturing, which they have huge market share in. This 10% increase in price has not lost them a single customer, at least that I'm aware of at this point. That's a strong example of pricing power. They've got tremendous market share, they've got an incredible business. You have Apple, for example, being one of their largest customers.
I think TSM has some really strong pricing power because you can't get chips made anywhere else. It's almost like a monopoly -- not quite because I believe Samsung and some other players are in there doing it. But at the scale that TSM is doing it, it's really difficult to do, and so that gives them their pricing power.
Toby Bordelon: I think interesting, too, I saw today that they are committed to spending like $44 billion this year to build out capacity. They're raising their prices but they're also just trying [laughs] to build more too. They are certainly not worried about losing sales. They're trying to increase their ability to produce even more. Good company, thanks Connor.
