J.P. Morgan Recommends Buying Netflix's Stock On The Dip

Stocks of Netflix NFLX -1.75% fell Thursday, as Wall Street took stock of a recent wave of price cuts that have been made in some international markets. Shares of the streaming giant are viewed as a good buy by an analyst at J.P. Morgan.

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It has been reported that Netflix (ticker: NFLX) has lowered its monthly subscription price in over 100 territories, according to Ampere Analysis. According to Ampere Analysis, the price reductions have been observable in Central and South America, sub-Saharan Africa, the Middle East, North Africa, Central and Eastern Europe, and Asia Pacific regions. There will be no impact on the company's biggest markets, such as North America and Western Europe, as a result of the cuts. For both new subscribers and existing subscribers, Ampere notes that the basic tier is reduced by anywhere from 20% to nearly 60%. More than 10 million subscribers are expected to be affected by the cuts, according to the company.

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Research and estimates from third parties are not discussed by Netflix. A share price of $319.92 was recorded on Thursday, down 4.5% from Wednesday.

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The J.P. Morgan analyst Doug Anmuth, who rates Netflix as Overweight with a price target of $390, said the stock reaction was overdone in a note to clients he sent to clients on Thursday. “It would be a good time to buy shares if the price pulls back," wrote Anmuth.

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"Overall, it has been observed that the price reductions are mainly occurring in smaller, smaller emerging markets, most of which do not have any localized pricing, but rather are priced in U.S. dollars," he added. “NFLX adopted a broader approach to pricing when it rolled out globally in 2016, taking into account more affluent users when setting its price. According to our research, NFLX is following the same path it took in India, where it reduced prices in December 2021 in order to better align its products with consumer demographics."

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The cuts will reduce revenue by 2% to 4%, he says, noting that in many relevant markets, subscribers already pay less.

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“I believe that this is an estimate on our part and that it will also be offset by an increase in subscribers," he wrote. “At the time of the fourth quarter earnings report, we believe that management also anticipated these price reductions.”

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