January 24, 2013

Netflix stock soars as company posts record growth

The company's stock climbed $43.60 in one day as investors celebrated an earnings report highlighted by the success of Netflix's Internet video service.

The Associated Press

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In this Oct. 10, 2011, file photo, the exterior of Netflix headquarters is seen in Los Gatos, Calif. Netflix stock, on Thursday, Jan. 24, 2013, is on its way to its biggest one-day gain since the video subscription service went public more than a decade ago. (AP Photo/Paul Sakuma)

All told, Netflix now has more than 33 million streaming customers worldwide, including 27.1 million in the U.S. Hastings believes Netflix eventually will have 60 million to 90 million U.S. subscribers, although he hasn't said how long it might take to reach that goal.

Netflix expects to build on the momentum by adding as many as 2.1 million more subscribers in the current quarter, which will include the release of a highly anticipated TV series called "House of Cards" made exclusively for the company. In the upcoming months, Netflix will debut several more pieces of original programming, including the fourth season of the critically acclaimed "Arrested Development," which ended its run on network TV in 2006.

"People love Netflix, but the original programming is something magic," Hastings said in a Wednesday interview. "It is definitely going to take our relationship with (subscribers) to an even better and more intense place."

Some analysts remain wary of Netflix because of the video-licensing bills that have been piling up. Through December, Netflix owed $5.6 billion during the next five years, up from $5 billion at the end of December. Although the company didn't break down how much it paid this year, Wedbush Securities estimates the amount at $2.5 billion.

"I think the company is genuinely mistaken in how it thinks it is going to manage content costs," Pachter said. "This is truly a house of cards and it's going to come crashing down this year."

Even Pachter was impressed with Netflix's fourth-quarter performance. It caused him to raise his 12-month price target on Netflix's stock from $45 to $55.

 

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