Netflix Q4 results prompts surge in stock price

Netflix (Nasdaq: NFLX)'s stock price surged nearly 18 percent in after-hours trading following fourth quarter results and a first quarter outlook Wednesday that beat the low expectations analysts had set for the company.

The streaming company reported earnings of $41 million, or 73 cents a share, down 14 percent from a year ago, when it earned $47.1 million, or 87 cents a share. The company reported revenue of $876 million, am increase of 47 percent over a year ago. Analysts had expected earnings of 54 cents a share and revenue of $857.3 million.

Netflix also reported it was down 2.8 million mail subscribers, and CEO Reed Hastings reiterated that the company is likely to lose money through 2012, including a loss in the first quarter that could be larger than analysts predict. But investors, looking for a ray of light from the struggling company, took the news to heart. The company said it had added a net 610,000 subscribers, taking its U.S. base to 24.4 million customers.

Analysts reactions were mixed.

Cody Willard, a former fund manager and editor of Trading With Cody, a financial blog, focused on the subscriber growth. "The company has at least turned around its net subscriber growth in the U.S.," said Willard. "That's huge."

Michael Pachter, a financial analyst who covers the company for Wedbush Securities, was far more critical. "I honestly think the market completely got this wrong. They think (Netflix) is growing again," Pachter said. "My view is they're either a high-growth, no-profit business or a low-growth profitable business. Either way, they're worth (less) than they're trading at now."

During the company' earnings call Hastings said Netflix was "rapidly increasing the amount of money that we spend on content domestically and internationally," adding that in the current quarter the spend has doubled, a necessity to drive subscriber growth. Hastings also cast doubt that any company was likely to establish a virtual MVPD with a national footprint.

"I don't think that's going to come into existence. Several large firms have tried to put that package together and backed off," he said. "I think what we'll see is a continuation of the current localized ‘over your own pipe' model."

For more:
- see the release
- see the NY Times article
- see this San Jose Mercury-News article

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