To say Netflix has been stuck in the “Upside Down” is putting it kindly. The streaming giant’s shares have dropped about 12% in the past month, mostly thanks to a mid-July sell-off. Turns out, Wall Street wasn’t too thrilled with Netflix’s revenue predictions, which landed about as gracefully as my son's kick last night when we were wrestling. I’m still recovering. 

But before you cancel your subscription and start doom scrolling on TikTok, there may just be a glimmer of hope ahead. I stumbled upon an analyst who thinks this dip could be a golden ticket. James Heaney from Jefferies is seeing dollar signs and unicorns. And I’m starting to see them myself. He's betting on a subscription price hike later this year, backed by a stellar lineup of upcoming content.

Heaney's not just throwing darts at a board here. We're talking "Stranger Things 5" and "Squid Game 2." Add in live sports deals they’ve made— like the NFL Christmas Day games and WWE Raw starting in January 2024, and Netflix’s content lineup looks like it's been hitting the gym with Dwayne "The Rock" Johnson.

(Source: New York Times)

This killer combo and a price bump could send ad revenue skyrocketing. He predicts a subscriber boost by year-end that will “We expect Netflix to accelerate subscriber growth in Q4, leading us to +7.45 million net adds (vs +3.75 million in Q3) and ahead of consensus estimates of +7.2 million," Heaney wrote. 

Remember the last time Netflix hiked prices in January 2022? The Standard plan jumped to $15.49 from $13.99. The Premium tier saw a bump too, going up to $19.99, and later to $22.99 in October. The ad-supported plan, introduced less than two years ago, is still the cheapest at $6.99 a month—a bargain compared to other major streamers.

Netflix's game plan? Turn ads into a cash cow by 2025 and beyond. They're kicking the ad-free plan to the curb, making the $15.49 Standard plan the new bottom tier for ad-free streaming. Heaney believes the Standard plan is ready for a December price hike, especially with Netflix’s new live sports ventures adding some muscle to their pricing power.

Netflix could easily follow in the steps of Peacock, which added 3 million subscribers in Q1 after airing an NFL Wild Card game. NFL games will give advertisers a real taste of Netflix’s scale, potentially boosting ad-tier adoption and ad revenue per user in 2025.

In last month’s earnings call, Netflix mentioned making "steady progress scaling [their] ad business," with ad-tier memberships growing 34% quarter-on-quarter. This growth was partly thanks to ditching the basic plan in some markets.

(Source: CNBC)

When asked about potentially raising the $6.99 ad-tier price, Netflix co-CEO Greg Peters didn’t beat around the bush. "It's our job to increase the value that we deliver to all our members," Peters said. He cited the company’s push into live events, new original programming, and games. "When we see positive signals from our members, we find the right moment to ask them to pay a bit more to keep that flywheel spinning."

So, while Netflix's stock might feel like Andre the Giant getting body slammed by Hulk Hogan, it might be worth tagging back in for another round. 

Stocks.News holds a position on Netflix.