Netflix (NFLX) Stock Soars on Earnings, Analyst Upgrades

Shares of Netflix Inc. (NFLX) were trading up +62.54 or +13.14 percent to $538.00 per share in Thursday's premarket trading after the company announced better than expected earnings after the bell yesterday. In addition, the stock is reacting to FBR & Company analyst, Barton Crockett's price target of $900 per share. Netflix stock closed at $475.46, down -3.25 or -0.68 percent in Wednesday's regular trading session.

Los Gatos, California based Netflix Inc. was founded in 1997 and is an Internet subscription service offering subscribers unlimited streaming television shows and movies that can be watched on television sets, computers or on mobile devices.
The company currently operates in North and South America, the United Kingdom, the Caribbean, Scandinavia, the Netherlands, and Iceland. Netflix has expanded its subscription base to over 62 million users worldwide in the company's first quarter of 2015, offering its service in more than 40 countries.

On a currency neutral basis, Netflix reported non-GAAP earnings of $0.77 per share, analysts expected the company to earn $0.63 per share in the first quarter. GAAP earnings were +0.39 compared with $0.89 in the same period one year ago. Revenue was in line with analyst expectations at $1.57 billion, showing a year on year increase of +24 percent, which was lower than the previous quarter's +26 percent increase with the quarterly decline in large part due to the impact of the strong U.S. Dollar.

The better than expected results were in part due to the company exceeding 62 million global subscribers, adding 2.28 million subscribers in the United States and 2.6 million internationally, beating Netflix own guidance and adding a total of 4.9 million new members in the first quarter. This compares to 4.3 million new subscribers added in the previous quarter.

Reed Hastings, Netflix Chief Executive Officer stated that Netflix original content, including "House of Cards , and "Bloodline were in part responsible for subscriber growth in the quarter. He also said that, "For most global Internet firms, the US is 20% to 35% of usage and revenue. We are not anywhere close to that yet, but we are continuing to invest in international. We launched France and Germany six or eight months ago and they were successful launches. Now we have added Australia, New Zealand. [In] all of these markets, the Internet and Internet television is catching on and we are leading relative to competitors.

He added that, "We are feeling very bullish on the long-term in all of these markets. We have seen when we entered in Latin America three or four years ago that it takes us a year or two to build the brand and get awareness. But think of it as consumers in every country in the world want the benefits of Internet television choice and selection and price. So absent severe piracy that might be in some of the newer countries, I think we are going to see large commercial success.

Adding to the stock's run up to all time highs was an analyst upgrade by FBR & Co. which set a price target of $900 per share on the company. Barton Crocket, the analyst who came up with the figure said that its analysis determined that 40 percent of TV household that use the service love Netflix more than regular Television, based on a survey made on 2,000 consumers. He said that, "In this outpouring of affection, we see Netflix as very likely to move towards 180 million global subscribers by 2020 (to more than 60 million in the U.S.) and, over time, enjoy mid-single-digit-plus ARPU growth.

Other analysts were quick to raise their price targets following the earnings release, with Sun Trust increasing their target from $410 to $550, Topeka Capital Markets, from $527 to $604 and RBC Capital, from $550 to $600 per share. Netflix stock is in uncharted territory following yesterday's earning's release and this morning's analyst upgrades.

Other News About NFLX

Why Netflix will have a tough time in China

After Google, Facebook and YouTube have been shut out of the country; Netflix could also run into problems in China.

Wedbush: Netflix's Decision To Amortize Less Than It Spends On Content 'Substantially Inflates' Earnings

In a report just published, Wedbush reiterated its Underperform rating, but raised its price target to $270 from $245after Netflix's first quarter results.

Other Stocks in the News

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Company reports highest earnings per share in five years.

Citigroup profit jumps as legal, restructuring costs fall

Citigroup announces a 16 percent increase in quarterly profits.

Published on Apr 16, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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