Netflix's outlook, user gains reinforce growth hopes

LOS ANGELES Tue Oct 22, 2013 4:03am IST

The Netflix sign on is shown on an iPad in Encinitas, California, April 19,2013. REUTERS/Mike Blake/Files

The Netflix sign on is shown on an iPad in Encinitas, California, April 19,2013.

Credit: Reuters/Mike Blake/Files

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LOS ANGELES (Reuters) - Netflix Inc(NFLX.O) gained more subscribers than expected at home and abroad, helped by original series like "Orange is the New Black," and predicted additional growth this quarter, sending its shares surging 9.4 percent to a record high on Monday.

Netflix, the biggest gainer in the S&P 500 in 2013, quadrupled profit in the third quarter as it added a higher-than-expected 1.3 million subscribers to its subscription video streaming service.

The company, which has invested heavily in original content such as political satire "House of Cards" to draw in subscribers, said it had 31.1 million U.S. streaming users in the third quarter. It expects to end the year with 32.7 million to 33.5 million users, accelerating that momentum.

"That keeps the view alive that this company has a larger subscriber base and has pricing leverage in its corner to extract more value," said Janney Montgomery Scott analyst Tony Wible, who rates Netflix a "buy".

Netflix's shares rose to $388.50 in after-hours trading, compared with their close of $354.99 on the Nasdaq. The stock has racked up successive life highs since September, as investors bet on its growth prospects.

During the quarter, Netflix released critically acclaimed prison drama "Orange is the New Black," part of its investment in exclusive original programming to keep and attract customers to its $8-a-month movie and TV streaming service.

Its original series slate attracted buzz during the quarter, with 14 Emmy nominations and three wins for shows including "House of Cards."

The company said it will double investments in original programming in 2014, when it will air second seasons of both "House of Cards" and "Orange is the New Black."

MOMENTUM

Wall Street also singled out the company's strong growth abroad. It added 1.4 million customers in international markets, bringing its reach in foreign territories to 9.2 million.

Netflix reported earnings-per-share of 52 cents, beating the average of 49 cents projected by Wall Street analysts surveyed by Thomson Reuters I/B/E/S.

Net income for the quarter reached $32 million, up from $8 million a year earlier, Netflix said in its quarterly letter to shareholders.

Standard & Poor's equity analyst Tuna Amobi said Netflix appeared to be gaining traction in some of its newest markets, and noted that "Orange is the New Black" will end the year as the company's most-watched original series.

"There is not a whole lot not to like. There is a whole lot of momentum behind the story," said Amobi, who has a "hold" rating on the stock. "They appear to have turned an important corner for potentially sustained subscriber growth." (Additional reporting by Liana B. Baker in New York; editing by Matthew Lewis)

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