Netflix Growth Coming From Lower ARPU Subs, Says Analyst
Netflix must continue hiking prices to offset ever-increasing content costs, Wedbush analyst Michael Pachter wrote investors Tuesday, after the streaming service’s Friday across-the-board U.S. price increases (see 2201140056). “Netflix is approaching a ceiling in most of the high GDP per…
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capita countries for above median income subscribers, while the lower GDP per capita countries appear to be fueling much of the new subscriber growth,” Pachter said. Netflix’s Q4 guidance implies roughly flat average revenue per user from Q3 “as the growth continues to come from lower” average revenue per unit subscriptions, he said. Wedbush modeled Q4 earnings per share of 84 cents, slightly above Netflix’s low guidance, “which underscores the sharply rising content costs as delayed productions were again underway in Q4, and as competition for content increases,” he said. Netflix typically raises prices when subscriber additions are strong, he said, “so we suspect that chatter about a subscriber ‘miss’ may be misguided.” Netflix reports Q4 earnings Thursday.