Thursday, January 23, 2014
SAN FRANCISCO (AP) — Netflix's fourth-quarter earnings soared six-fold as the Internet video service added another 2.3 million U.S. subscribers to burnish its status as one of the world's most popular entertainment outlets.
The financial results announced Wednesday topped analyst estimates, and Netflix basked in Wall Street's adulation. The company's stock surged $58.57, or more than 17 percent, to $392.30 in extended trading.
If the shares behave similarly in Thursday's regular session, the stock will hit its highest level since Netflix Inc. went public nearly 12 years ago.
Investors tend to focus more on Netflix's subscriber growth because the widening audience provides the company with the means to negotiate the rights to show even more compelling content to show in the future.
"Internet video is catching hold," Netflix CEO Reed Hastings said in a Wednesday interview with The Associated Press. "Consumers love that they can watch what they want when they want it. There is just a lot of consumer appetite for this."
Netflix ended December with 33.4 million U.S. subscribers who stream video over high-speed Internet connections, up from 31.1 million in September. The company picked up another 1.74 million subscribers outside the U.S. to end last year with 10.9 million international customers.
People are still flocking to the service. Netflix expects to gain an additional 2.25 million U.S. subscribers during the first three months of this year.
The strong showing follows a year in which Netflix's stock nearly quadrupled in a resounding comeback from a steep downturn triggered during the summer of 2011 after the Los Gatos, Calif. company split apart its Internet video service and DVD-by-mail service. The division resulted in price increases of as much as 60 percent for customers who wanted to keep both options.
Hastings apologized and the uproar eventually died down as the company began stockpiling its $8-per-month streaming service with more original programming, such as the Emmy-award winning "House of Cards." The second season of that series will be released Feb. 14, contributing to management's optimism about its subscriber growth for the current quarter ending in March.
As more people connect their TVs to the Internet and buy mobile devices, Netflix's streaming service is emerging as a must-have pastime. Meanwhile, the DVD-by-mail service is gradually dying as more subscribers abandon watching video on physical discs. The company ended December with 6.9 million DVD subscribers, down from 13.9 million in September 2011.
In a reflection of the DVD's steadily declining role, Netflix disclosed plans to make a slight change in the appearance of the red envelopes that deliver the discs. The envelopes will now be stamped with "dvd.netflix.com," instead of Netflix's stand-alone brand in an effort to make the company's name even more synonymous with Internet streaming.
Netflix earned $48 million, or 79 cents per share, during final three months of last year. That compared to $8 million, or 13 cents per share, at the same time in 2012.
Analysts surveyed by FactSet had predicted average earnings of 65 cents per share for the just-completed quarter.
Revenue rose 24 percent from the previous year to nearly $1.17 billion, just slightly above analyst forecasts.