Netflix raised prices and the stock soared
- The rate hikes constitute a jump of between 13 and 18 percent.
- The new prices take effect immediately for new customers. Existing subscribers will be grandfathered in over the next three months.
- Previous rate increases have had little effect on subscribers, and have traditionally buoyed the stock.
Netflix is raising its prices again, and the news sent the company's stock up 6.5 percent Tuesday.
Netflix's cheapest basic plan will cost $9, up from $8; its most popular HD standard plan will cost $13, up from $11; and its 4K premium plan will cost $16, up from $14.
The rate hikes constitute a jump of between 13 and 18 percent — the company's biggest increase since launching its streaming service 12 years ago — and will take effect immediately for new customers. Existing subscribers will see the price increase on their bills over the next three months.
Customers in Latin American, the Caribbean and some other countries will also see the higher rates. Major international markets like Mexico and Brazil won't be affected.
The extra cash will help to pay for Netflix's huge investment in original shows and films, and finance the heavy debt it's taken on to ward off streaming threats from Amazon, Disney and Apple. Streaming incumbents like Netflix, HBO and Hulu have faced increasing pressure from new entrants, driving overall investment in the space to new highs.
On Monday, Comcast-owned NBCUniversal announced it would launch a new streaming service in 2020. NBC's service will be free and supported by advertising if you already have a pay-TV account. It'll cost approximately $12 per month if you want to remove ads or sign up if you don't have a pay-TV service. Disney is also set to launch its Disney+ service later this year.
It's the fourth time Netflix has raised prices since its streaming service launched. The company last raised rates in October 2017, sending shares up 3 percent that day. Previous rate hikes have had little effect on subscriber growth, and have traditionally buoyed the stock.
Last quarter, the company reported domestic subscriber growth of 10.7 percent year over year, totaling 58 million U.S. subscribers. It counts more than 78 million subscribers outside the U.S.
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Netflix was the best performing of the so-called FAANG stocks last year, gaining nearly 40 percent in 2018 and outpacing Facebook, Amazon, Apple and Google's parent Alphabet. Netflix has already gained 30 percent in the first few weeks of 2019.
Separately Tuesday, analysts at Goldman Sachs projected a strong earnings update from Netflix when it reports fourth-quarter results on Thursday. The firm is projecting a 20 percent upside for the company's stock.
Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.
— The Associated Press contributed to this report.