Netflix: Price Increases Come Sooner Than Expected but Are Consistent With Our Outlook

Key Morningstar Metrics for Netflix

• Fair Value Estimate
  : $80
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : High

Netflix NFLX announced on March 26 that it’s increasing prices across all US plans and tiers.

Why it matters: With our view that subscriber additions will contribute far less to Netflix’s top-line growth than in the past due to mature US market penetration, we consider price increases the foremost requirement for Netflix to maintain double-digit top-line growth.

• After Netflix raised US prices in January 2025, we didn’t expect the next round of increases to come before the fall. This increase likely pulls forward our sales forecast without materially changing average growth over the next two years.
• When it issued its 2026 sales guidance, Netflix said price increases were incorporated, but we suspect the subsequent disintegration of its Warner Bros. acquisition altered the timing, meaning it may raise its 2026 outlook when it reports earnings next month.

The bottom line: We maintain our $80 fair value estimate and our narrow moat rating.

• While 2026 sales may be higher than we anticipated, that probably means that our 2027 growth rate is now slightly elevated. In all, timing differences associated with our consistent general outlook have not led us to change our fair value estimate.

Between the lines: More important than this price increase is whether Netflix now intends to increase prices annually rather than the 18-24 month cadence we’ve built in. A belief that Netflix can raise prices by at least $1 annually would make our forecast too bearish.

• With the standard plan now $20 per month, we still doubt Netflix can maintain an annual pace of increases while also consistently holding subscribers, especially with popular content increasingly being disseminated across more platforms.
• Another potential risk of raising prices too quickly is a bigger mix shift to ad-supported plans, which will now be $9 per month. A larger ad-supported base bolsters advertising sales opportunities, but those must also make up the $11 per subscriber per month headwind versus ad free.