Is Netflix a Buy After Its Most Recent Price Hike?

Key Points
Netflix recently raised prices on U.S. subscribers by $1 to $2 per month.
It will need to continue growing revenue by double-digit percentages to justify its current valuation.
Netflix holds a considerable advantage over its competition when it comes to pricing.
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The writing was on the wall for Netflix (NASDAQ: NFLX) to raise prices once again in 2026, in the form of the fourth-quarter letter to shareholders. Management said its revenue growth will be driven "by increases in membership and pricing" this year.
Sure enough, the company recently announced price increases for its U.S. customers of $1 to $2 per month, depending on the subscription tier. Investors may be wondering just how much pricing power Netflix has left and whether it can continue growing sales by double digits over the long run. At its current stock price, that's a necessity for making it a worthwhile investment today.
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Will the competition keep Netflix at bay?
Netflix is by far the most popular streaming service in the U.S. It ended 2024 with nearly 90 million subscribers across the U.S. and Canada, but it stopped updating investors on exact subscriber numbers last year.
Its closest competitor, Walt Disney (NYSE: DIS), counted 60 million U.S. subscribers for both Disney+ and Hulu as of the end of September. Warner Bros. Discovery had a similar number of domestic subscribers across its streaming services at the end of 2025.
But Netflix isn't just beating those competitors when it comes to total subscribers; it's also managing to attract far more viewing hours per subscriber than the competition. The average U.S. subscriber spends over one hour per day watching Netflix, according to data from eMarketer. The next closest competitor is Hulu at 36 minutes.
That fact isn't lost on management, but it says looking beyond pure engagement numbers can indicate whether it's delivering better value for subscribers. During the fourth-quarterearnings call its CEOs Greg Peters and Ted Sarandos talked about engagement, with Netflix originals rising faster than second-run series and films. They also said it had declining churn rates, indicating higher customer satisfaction. As such, it had the confidence to increase its pricing.
Even after the increase, Netflix's standard pricing isn't much higher than its biggest competitors. Its ad-supported tier remains well below its competitors' rates, and that may be a key opportunity to keep growing long term.
Despite the $11 per month difference between the ad-supported tier and the standard tier, Netflix can very easily make up the difference in revenue with advertising, thanks to its high engagement rate. Management expects to double its ad revenue this year, but there remains a long runway for growth in the business.
Strong advertising results and high engagement could enable the streamer to keep raising prices more frequently than in the past, enabling it to generate the double-digit growth necessary to justify its earnings multiple of 30. Combined with steady operating-margin expansion over the next few years, I think Netflix is still worth buying today.
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Adam Levy has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Netflix, Walt Disney, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.