Netflix Stock Soars After Positive Earnings Report
It’s a great day to be a Netflix Inc. shareholder. Stock in the online subscription service shot up almost 40 percent in early morning trading, fueled by an impressive earnings report that exceeded Wall Street expectations.
Netflix reported late Wednesday it added 2 million subscribers during the fourth quarter, blowing past analysts’ expectations of 1.5 million new customers. CEO Reed Hastings credited the gains to viewer’s watching a greater range of entertainment on tablets and Internet-connected televisions they received as holiday gifts.
“Netflix posted impressive [fourth-quarter] results that came in ahead of our estimates across nearly all metrics,” wrote Barclays Internet and media analyst Anthony DiClemente in an investor note. “[First-quarter] guidance also implied upside to our estimates, as increased device penetration, coupled with the release of original programming, should help with subscriber acquisition.”
Although Netflix stock skyrocketed from its closing $103.26 on Wednesday to $142.25 in midday trading Thursday, Wedbush Securities analyst Michael Pachter kept the stock at an “underperform” rating, and cautioned long-term challenges remain.
“We expect higher costs to result in erosion of the quality and quantity of Netflix’s content library over time, resulting in higher churn (subscriber turnover), and we expect domestic subscriber growth to slow or stall completely in the next few years,” he said in a note to investors. “We expect slowing growth to be evident later in 2013, with fewer net domestic subscribers added year-over-year.”
Stockholders may be dancing in the streets, but they should remember Netflix’s stock still remains well below its peak price reached in July 2011 when it was $305 a share.
[Image via Marit & Toomas Hinnosaar/Flickr]
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