More app and entertainment businesses are transitioning from user or payer growth stories to pricing stories.
That's according to KeyBanc analyst Justin Patterson, citing the history of Netflix Inc (NASDAQ: NFLX). This goes smoothly when engagement metrics are improving (often due to product and content quality).
Patterson feels most confident about Overweight-rated Netflix (raised price target to $525 from $510) and Spotify Technology SA (NYSE: SPOT) (maintained price target of $255), given proven pricing power and product leadership.
Spotify can sustain at least mid-teens annual revenue growth through pricing (new plans and price increases), subscriber growth, ad monetization, and new verticals.
With Netflix improving its licensed content mix, scaling its ad-supported tier, and competition rationalizing, he expects ...