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Netflix Rate Hike To Be Key Test Of Its Pricing Power

Netflix ( NFLX ) will be putting its pricing power to the test next month as many long-time U.S. subscribers get hit with a price increase. Morgan Stanley analyst Benjamin Swinburne says the price hike will have little impact on Netflix’s U.S. subscriber churn rate. Netflix stock was down a fraction, below 105, in afternoon trading on the stock market today . “Our survey work is clear: Original programming drives member satisfaction, which we believe drives down churn and creates pricing power,” Swinburne said in a research report Thursday. Morgan Stanley’s most recent streaming video survey found that Netflix’s original programming strategy is gaining traction. About 45% of Netflix users surveyed cited original shows as a reason to subscribe and nearly 30% of all survey respondents stated Netflix offers the best original programming among subscription video-on-demand and premium TV networks — both healthy increases year-over-year, Swinburne said. Cowen analyst John Blackledge on Tuesday said he, too, believes  original programming will help Netflix weather the upcoming price increase . Baird analyst William Power is more cautious. “While planned price increases should benefit overall revenue  and  help  cover  growing  content  costs,  the  potential  churn  impact  has been a central question for many investors,” Power said in a report Thursday. Power rates Netflix stock as neutral with a price target of 115. Still, Power says the price increase will not have a big impact on subscriber numbers, citing Netflix’s compelling value proposition. Morgan Stanley estimates that 45% to 50% of Netflix paid domestic subscribers at the end of the first quarter still pay the grandfathered price of $7.99 a month. They’ll see an increase to the current price of $9.99 a month.

Virtual Reality Headset Sales Seen Reaching $895 Million This Year

High-end virtual reality headsets from Facebook ( FB )-owned Oculus, HTC and Sony ( SNE ) will account for just 13% of unit shipments in the emerging market this year. But they’ll make up 77% of revenue spent on VR headsets in 2016, Strategy Analytics predicted Thursday. The research firm estimates that VR headsets will generate sales of $895 million worldwide this year. Most of the revenue will come from the recently launched Oculus Rift and HTC Vive, as well as this fall’s PlayStation VR, the firm said. But most of the 12.8 million VR headsets sold this year will be lower-priced devices in which a smartphone serves as the VR screen. Samsung’s Gear VR and Alphabet ’s ( GOOGL ) Google Cardboard are among these cheaper headsets. State-of-the-art virtual reality headsets tethered to PCs and game consoles will barely exceed 1.7 million devices shipped globally in 2016 due to high pricing, Strategy Analytics said in a research report. Smartphone-based VR systems can serve as an effective “gateway drug” to upsell users to higher quality VR experiences down the road, researchers said. VR could fuel a new “tech spec race” in high-end hardware in areas such as display resolution, graphics processing units, storage and 360-degree cameras, Cliff Raskind, director of Strategy Analytics’ wearable device ecosystems service, said in a statement. Video games will be an early driver for VR headset sales. Other applications include virtual experiences in entertainment and sports, marketing and product retailing, and education and training. “Further out still, it is envisioned that increasingly capable 3D cameras and apps will allow users to relive (play back) and share experiences to VR headsets with compelling realism,” Strategy Analytics said. Oculus Rift began shipping on March 28 and costs $599. HTC Vive went on sale Tuesday and costs $799. PlayStation VR will cost $399 and go on sale in October. Oculus Rift and HTC Vive require the use of a high-end PC and PlayStation VR needs to be coupled with the PlayStation 4 game console. Image provided by Shutterstock . RELATED: Virtual Reality Could Disappoint Initially, Baird Says

Silicon Motion Jumps As Preliminary Q1 Revenue Exceeds Estimates

Silicon Motion Technology ( SIMO ) stock hit a record high Thursday after the company said first-quarter revenue would come in higher than expected. The Taiwan-based provider of flash-chip storage devices used in consumer products said revenue is expected to be 14% to 15% higher than the previous quarter. It’s prior guidance was in the range of a 2.5% decrease to a 2.5% increase. The consensus estimate, prior to the improved guidance, is for Silicon Motion to report revenue of $99 million, up 1% sequentially and up 23% year over year, which would be the eighth quarter in a row of double-digit gains. The consensus on earnings per share is 56 cents, up 17%, according to analysts polled by Thomson Reuters. Silicon Motion also said its gross profit margin is expected to be in the upper half of its original guidance range of 49% to 51%. Silicon Motion stock was up 4%, near 39.50, in afternoon trading on the stock market today . Shares rose as much as 6.4% earlier, hitting an all-time high of 40.27. Silicon Motion has an IBD Composite Rating of 99, the highest possible, and broke out of a cup-with-handle base at 34.08 last month. That leaves the stock 16% extended. The company is scheduled to release full Q1 earnings after the market close April 27. The majority of Silicon Motion products are integrated in consumer electronic devices. A significant portion of revenue is from customers that use the products in removable and embedded solid state storage solutions for smartphones, tablets, digital cameras, notebooks and desktop PCs. Its customers include Samsung and SK Hynix. Competitors in the mobile storage market include Marvell Technology ( MRVL ). On Tuesday, husband and wife co-founders Sehat Sutardja and Weili Dai resigned under pressure as CEO and president, as the company in March completed a review by its audit committee that found sales staff was under significant pressure from management to meet revenue goals. The company has delayed the filing of its 10-K statement, and Nasdaq has put the company on notice of possible delisting. Marvell stock jumped 13% on Tuesday on that news, but was down a fraction, near 10.80, Thursday afternoon.