Netflix Stock Soars as Subscribers Return

  • Share
  • Read Later
Gareth Cattermole / Getty Images for Netflix

Netflix, the streaming video and DVD service, saw its stock price soar over 22% Thursday after reporting earnings results that beat Wall Street expectations. The company said it added 610,000 new customers last quarter, in a sharp rebound from a debacle last summer when 800,000 quit the service following an unexpected price hike.

It’s a welcome reversal for CEO Reed Hastings, who endured consumer vitriol following an aborted proposal to split the company’s DVD business from its streaming business.

Although the company felt the lingering effects from the earlier wave of customer defections — with net income of $40.7 million compared to $47.1 million one year ago — that wasn’t as bad as Wall Street had expected, which helped to propel the stock upward. Following the results, several analysts, including Citi’s Mark Mahaney, raised their projections for the stock. Mahaney increased his price target to $130, saying that the company’s “streaming story is still early days.”

(MORE: Should Americans Care About Apple’s iPhone Factory Conditions?)

Others were more cautious. JPMorgan analyst Doug Anmuth said the company’s fourth-quarter performance “suggest the company has likely turned the corner in terms of subscriber growth and profitability trajectory.” Nevertheless, he maintained a “neutral” rating on the stock, while edging his price target up slightly to $95 per share.

Netflix shares rose over 22% to close at $116.01. Still, thats a far cry from the heights the company achieved last year — nearly $300 in July — before the price hike helped torpedo the stock.

In a letter to shareholders, Hastings sounded a bullish note about the company’s prospects. “The global opportunity for streaming TV shows and movies becomes more compelling every year with the rise of smart TVs and faster broadband,” he wrote. “Every quarter we are improving our content selection, we are improving our user experience, we are learning more about social, and we are increasing our brand awareness in the 47 countries where we offer our Internet TV network.”

(LIST: The 10 Best (and Most Unusual) Employee Perks)

Netflix, which now boasts 21.7 million online subscribers, was an early pioneer of streaming video to living room televisions, but the company is girding for new competitors like Amazon — as well as existing video giants like Comcast, Verizon and HBO — to make a play for that market.

0 comments
Sort: Newest | Oldest