Traders Embrace Netflix Hike, Customers Boiling Mad

by Todd Shriber

Netflix (NFLX), the provider of online streaming movie services and DVDs by mail, has once again found a way to keep its name in the news and irk its customers. On Tuesday, the California-based company announced price increases for its streaming and DVD rental services. Unlimted DVDs one at a time will cost $7.99 a month, but if you want two at a time that will run you $11.99. Meanwhile, access to unlimited streaming will cost $7.99, according to Forbes.

Both services combined pushes the price increase to roughly 60%, going from nearly $10 a month now to almost $16. In a tough economy where unemployment is rising, this would appear to be an ill-conceived move by Netflix, especially since a subscription is about as discretionary as discretionary spending gets. Not surprisingly, the blogosphere has had some choice words for the move, but Wall Street has reacted in much different fashion.

Take a gander at this chart. It’s easy to see traders and investors are loving news of higher fees from Netflix. The reaction from the sell-side is bit more muted. As Barron’s reports, Goldman Sachs and Piper Jaffray are bullish on the news, as both now have $330 price targets on the stock, representing about 10% upside from where the shares currently trade.

On the other hand, BMO Capital Markets, Lazard Capital Markets and Jefferies appear less-than-enthusiastic. BMO did raise its price target on Netflix to $280 from $210, but that is below the stock’s current levels, Barron’s reports.

News of higher fees is never good for customers, Netflix subscribers included. But from a trader’s perspective, Netflix deserves some credit. A rising stock price following news of price increases is something most companies can only dream of.

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