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Netflix (Nasdaq: NFLX) Stock Soars 18% on Earnings Beat

By , Associate Editor, Money Morning • @KyleAndersonMM •

Netflix Inc. (Nasdaq: NFLX) stock soared as high as 18% in after-hours trading Wednesday after the company reported Q4 earnings of $0.79 per share - beating analysts' estimates of $0.66. NFLX reported revenue of $1.18 billion, up slightly from a projected $1.17 billion.

NFLX stock traded as high as $392 after hours.

The $0.79 earnings per share (EPS) was an increase of 507% from the previous year, when NFLX reported EPS of $0.13. Revenue was up from $945 million in Q4 of 2012.

Most importantly, Netflix added 2.3 million subscribers in the United States during Q4. That beat an already optimistic estimate of 2 million. Netflix currently has approximately 33.4 million subscribers in the United States.

The company reportedly added 1.74 million international subscribers. That's down slightly from the 1.84 million it added last year. NFLX reiterated its focus on bolstering its international subscriber base, which currently sits at 10.93 million.

Netflix officials estimate adding 3.85 million subscribers in the first quarter of 2014. The company has set a goal of adding 2.25 million U.S. subscribers and 1.6 million international subscribers.

Can Netflix (Nasdaq: NFLX) Stock Maintain Momentum?

NFLX stock has pulled back a bit in 2014 - a 10% drop in January - but that doesn't mean investors should run from NFLX stock.

Money Morning's Defense & Tech Specialist Michael Robinson still sees Netflix as a "game changer."

 


"[Netflix] just announced an initiative at CES (Consumer Electronics Show 2014) last week in which they're moving into ultra-high-definition television. It's called '4K.' Content is what's lacking in that area," Robinson told Stuart Varney on FOX Business' "Varney & Co." "We've got the technology, but nobody's broadcasting in that. They're going to launch an original series in this. They want to own the home market."

Original series "House of Cards" and "Orange Is the New Black" have changed Netflix's reputation from just a video-streaming service.

A fact that will also set Netflix apart from competition: It'll be one of the first companies to develop content for 4K technology.

MKM Partners raised its price target on NFLX stock from $370 to $440 earlier this week, citing these reasons:

"We think NFLX is in by far the best position to grow a very large, global subscription business in this emerging opportunity," MKM Partners' Rob Sanderson told Barron's. "The company has the lion's share of know-how, scale advantages over other OTT [Over-The-Top] providers and the most actual data on viewing behavior of any provider of video services across any platform."

"The base of roughly 40mn paying subscribers globally is just the beginning. We think this business will scale to 150-175mn global subscribers over time," Sanderson said.

This post updates this original post from 1/22/14 at 7 a.m.:

Netflix Inc. (Nasdaq: NFLX) stock was one of the biggest success stories of 2013 - soaring 312% - and should be reflected in Q4 earnings.

NFLX is projected to report Q4 earnings of $0.66 per share today (Wednesday), up from $0.13 last year. Revenue estimates are also optimistic at $1.17 billion for Q4. That's up 24% from 2012.

The key figure is new users. Netflix is expecting to report 2 million new subscribers for the fourth quarter. That's after adding 1.3 million new customers in the United States in the third quarter.

Analysts will also have their eye on Netflix's international expansion. France and Germany are the two latest countries rumored as Netflix targets, and tapping into foreign markets is key to bolstering its customer base.  

The $0.66 earnings per share (EPS) estimate represents a growth of 27% from Netflix Q3 earnings. NFLX has only missed earnings estimates three times in the past 10 years.  

For the full year, consensus estimates place Netflix's EPS at $1.48, on revenue of $4.3 billion. In the past 60 days, the consensus estimate has jumped $0.07 from $1.41. 

Investing in Tech: Netflix (NFLX) Joins Profit Leaders

Money Morning's Event Trading Specialist Shah Gilani sees tech stocks like Netflix, Amazon.com, Inc. (Nasdaq: AMZN) and Google Inc. (Nasdaq: GOOG) as bellwethers for the technology industry. And with the current bull market we're in, tech "bellwethers" are in a good position.  

"[Technology stocks] are all going to rise. I think all boats are going to rise with the tide. I think we're at the beginning of a generational bull market in my opinion," Gilani said on "Varney & Co."

And according to past Netflix reports, NFLX stock typically moves at least 5% in either direction the day following earnings. It's done so in 20 of the past 21 quarters, according to Bespoke Investment Group.

Unless NFLX completely whiffs on earnings, it should keep its positive momentum moving forward in 2014. Continually adding subscribers and tapping into the newest technologies is what makes NFLX stock a "game changer."

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