Netflix’s Original Content Might Push Prices Higher for Subscribers, Morgan Stanley Says

Netflix's burgeoning original content and success in international markets means the streaming service is ripe for a price increase, according to Wall Street firm Morgan Stanley.

The firm wrote that Netflix's shares have increased, citing the service's increasing subscriber base.

"We believe share performance is highly dependent on increasing global membership scale," analyst Benjamin Swinburne wrote in a note to clients Thursday via CNBC. "Proven success in the US and initial int'l markets provides a roadmap to success in new markets, and scale should allow Netflix to leverage content investments and drive margins."

Swinburne increased his price target to $255 from $235 for Netflix shares, which is 17 percent higher than the closing price on Wednesday.

The streaming service has previously detailed plans to massively increase its amount of original content, and Morgan Stanley said that Netflix has the ability to drive average revenue per user growth due to its increase in original content.

Swinburne added that Netflix's presence in broadband-enabled households in international markets outside of China increased to 13 percent last year from nine percent in 2016, noting original content as an important factor.

"These markets also grew despite a generally higher price point for consumers and benefited more from Netflix original programming than prior markets in prior years," he wrote.


Netflix recently drew the ire of some subscribers when announced in October that it would be raising prices, which it did in November. The increases brought the service's $9.99 subscribers to $10.99 and the $11.99 subscribers to $13.99 while the $7.99 subscribers stayed the same.

Photo Credit: Netflix