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Netflix stock jumps nearly 40% in early trading

January 24, 2013|By Dawn C. Chmielewski
  • Netflix stock surged on strong fourth-quarter earnings. Analysts expect modest subscriber gains in the first quarter, thanks to new original content, including the forthcoming series, "House of Cards," starring Kevin Spacey, in an adaptation of a British classic.
Netflix stock surged on strong fourth-quarter earnings. Analysts expect… (Melinda Sue Gordon / Associated…)

Netflix Inc.'s stock shot up nearly 40% in early morning trading, fanned by domestic subscriber gains and revenue that exceeded Wall Street's expectations.

Shares of the online subscription service were trading at $142.86 Thursday, up substantially from Wednesday's closing price of $103.26.

The company gained 2 million new customers for its U.S. streaming service -- well above projections of 1.5 million -- as the growing popularity of Internet-connected televisions and tablets spurred demand for digitally delivered movies and TV shows.

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"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."

Netflix will launch a widely anticipated original series, "House of Cards," on Feb. 1, and will offer new episodes of the canceled Fox series "Arrested Development" in May.

DiClemente said Netflix could face challenges maintaining subscriber growth in the last half of the year, "once the novelty of new programming wears off and the pace of content acquisition slows."

Netflix also made stronger gains internationally than many in the investment community anticipated.

Oppenheimer analyst Jason Helfstein wrote that the addition of 1.8 million new subscribers globally was 10% above his guidance for Netflix's fourth quarter. He projects the number of international customers could more than double in the first quarter -- compared with the same time a year ago, helping to trim the losses associated with the expansion into new markets.

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