Netflix Q4 tops expectations; Shares pop 14%

Nathan Pensky · January 25, 2012 · Short URL:

Online content-streaming site rounds out a tough 2011 by performing better than analysts expected

Shares of Netflix shot up 14% to $108.75 in after-hours trading after the company posted Q4 earnings report that were better than analysts' expectations.

Netflix posted earnings of $41 million, or 73 cents a share, on revenue of $876 million. Analysts expectations, as reported by FactSet Research, had earnings at 54 cents a share on revenue of $857.3 million.  

The company also boasted 21.67 million US subscribers to its Instant View content-streaming platform, an increase over Q4 of approximately 220,000 subscribers.

Netflix indicated via its earnings report that members watched two billion hours of content in Q4, about 30 hours per month per member.

The company also reported that DVD members declined from almost 14 million members to 11.2 million members, due to the price-hike. Stats show that "hybrid members," or Netflix users who use both DVD plans and streaming plans, are fleeing the DVD portion of the service in droves and increasingly opting for streaming-only plans.

However, Netflix also reports that DVD plan cancellations "ebbed" over the course of Q4, with weekly rate of cancellation declining since the September 2011 peak -- when, coincidentally, the price hike was implemented. Still these numbers are just fine and dandy with Netflix, especially in comparison with their abysmal Q3, which saw membership decline by 800,000.

"Domestic streaming margins were above guidance," said Sterne Agee analysts Arvand Bhatia and Brett Strauser. "In International revenue/profits were at the upper end of guidancewhile subscriber guidance appeared in line."

2011 was a not-so-great year for Netflix, with the aforementioned price hike and a strange spin-off of its DVD service into a separate company Quikster, which confused customers so thoroughly that the initiative was promptly scuttled. Perhaps not surprisingly, former Netflix Chief Marketing Officer Leslie Kilgore was removed from her position to that of a "non-executive director." As of yet, no one has filled her spot.

And though Netflix will be soon offering original content on the site, the company might still have reason to fear for the future. Today's earnings report saw the confirmation of a rumor that Amazon would spin off its Instant video content-streaming service into a cheaper Netflix Instant View competitor. Netflix rightly claims that their option has much, much more variety of content, but it's possible that will change in the coming year.

Another tick in the loss column for the coming year, Netflix was recently told by Warner Bros. Home Entertainment that it would have to wait 56 days for their licensed content, as opposed to their previous 28-day waiting period.

Amazon Instant Video currently has between seven and eight million subscribers, as compared to Netflix's almost 22 million streaming subscribers, so they're not currently a significant threat. But with Netflix's luck, who knows?

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