Netflix Screams to 16-Month Highs on Turning a Profit in Q4

Andrew Klips |

Shares of Netflix Inc. galloped to the highest levels since September 2011 in early trading on Thursday up as high 44 percent to $149.17 as the movie rental and streaming video provider crushed Wall Street expectations with its fourth-quarter earnings report on the back on a growing number of U.S. subscribers.

The Los Gatos, California-based company stunned analysts by reporting a quarterly profit of $7.9 million, or 13 cents per share, on revenue of $945 million, an 8 percent increase from $875.6 million in the year prior quarter.  In Q4 2011, the company earned $35.2 million, or 64 cents per share.

Analysts were expecting Netflix to lose 12 cents per share on revenue of sales of $934.7 million.

Wall Street didn’t have its hopes set real high for the quarter after Netflix had warned in October that it was probably going to see a loss for the October to December period, citing expenses related to new operations in Nordic countries.  Netflix’s total international contribution loss was $104 million for the quarter.  Those losses are expected to narrow as no new international launches are planned for the first half of this year.

During the latest quarter, Netflix added 2.05 million new U.S. subscribers, to bring its domestic total to 27.15 million.  The company had previously said that it expected to add between 1.3 and 2 million new subscriptions in the quarter.  In Q4 2011, only 220,000 new subscriptions were added.

Across the full year 2012, the company invested heavily to grow its international footprint; now spanning 40 countries.  To that end, 4.27 million new international subscribers joined, bringing the total global addition of new subscribers in 2012 to 9.75 million.  At the end of the year, Netflix had 33.27 million global streaming members.  The company has benefited from the growing number of mobile device users, said Netflix CEO Reed Hastings in a conference call discussing the quarter’s results.

According to Hastings, this is only “the beginning of a trend around internet connected ecosystems with devices and certainly the more convenient those devices get, the more people will feel comfortable watching and enjoying content on a wide range of devices.”

Domestic DVD subscribers dropped by 380,000, lowering total paying members to 8.22 million at the end of 2012.

Looking ahead, Netflix expects revenue of $1.0 billion to $1.03 billion during the first quarter of 2013 and that it will end the first quarter with between 35.1 million and 36.2 million total global streaming customers.

Analysts were expected the company to forecast $969.4 million in revenue.

The earnings beat sent shares of NFLX as high as $139.90 in after hours trading on Wednesday, marking their highest level since late in September 2011 and a move of more than 35 percent from Wednesday’s closing price of $103.26 (which was up 5.6% on the day).  Shares had tumbled from highs at $304.79 in July 2011 as the company faced intense scrutiny amidst growing headwinds of competition, dropping to around $53 per share in September before mounting a strong comeback to current levels.

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Companies

Symbol Name Price Change % Volume
SGC Superior Uniform Group Inc. 19.84 0.03 0.15 33,685
NFLX Netflix Inc. 123.24 -2.15 -1.71 8,987,712

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