Streaming giant Netflix (NASDAQ:NFLX) is no stranger to divisiveness. Just look at the reactions to the release of “Cuties,” and the ongoing furor around “Big Mouth.” But this time, Netflix delivered a blow that polarized its viewers and made its shareholders oddly happy. That move sent share prices up over 2% in the closing minutes of Thursday’s trading session.
The move in question: Netflix shut down its basic tier of service. This June, no customer will be able to get in on the action, and those already in will be out. While the ad-supported tier will still be in play, the slightly more expensive but ad-free basic tier will be unavailable. The plan to do just that was first announced back last summer, but the fact that it’s happening left customers with a bad taste in their mouths. Several customers noted that they would be customers no longer after such a move, insulting Netflix’s policies, its math, and the service itself.
For the Survivors, a Choice
Those who don’t simply throw up their hands and go elsewhere—and indeed, there are several other streaming video options out there—will now choose between the Basic with Ads tier at $7 per month, the Standard tier for $15.50 a month, and the Premium tier for $23. Moreover, for those who want access to all titles Netflix has, they’ll have to go into the higher-cost tiers, as some content is, essentially, paywalled. And of course, Netflix likely hopes that its video gaming content will help keep users in the fold even with what amounts to a fairly substantial price hike.
Is Netflix a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on NFLX stock based on 23 Buys, 12 Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 76.86% rally in its share price over the past year, the average NFLX price target of $657.61 per share implies 16.5% upside potential.
