By Sam Boughedda
BofA analysts told investors in a note Friday that Netflix (NASDAQ:NFLX) price cuts in certain territories position the company for subscriber growth over the next several years.
Netflix confirmed it is reducing prices across various international markets, with reports indicating the reductions will be implemented in regions including Asia-Pacific, Central and Eastern Europe, the Middle East and Africa, Sub-Saharan Africa, and Latin America.
"Reports have indicated that the price decreases will range from 20% to 60% depending on the market and will apply to new and existing subscribers. While on the surface these are significant pricing reductions, we believe that the impact to total revenue will be relatively limited given already low ARPUs across these territories," wrote the analysts, who maintained a Buy rating and $41 price target on Netflix shares.
In addition, they explained that as many of the markets are developing, their subscriber bases are smaller, which "should also limit the potential revenue loss."
"It appears that this strategic action has been contemplated for some time, and given NFLX's aspirations to crack down on password sharing, this could serve as a pre-cursor to more deliberate action. Therefore, we expect these price cuts to position the company to increase subscriber growth in several of these markets in coming years," added the analysts.