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Netflix's 4Q results catapult stock to new high

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January 23, 2014 01:14 PM EST | AP

SAN FRANCISCO (AP) — Netflix's stock climbed to a new peak Thursday as investors reacted to strong quarterly earnings and an optimistic management forecast that left little doubt about the Internet video service's growing allure.

The shares surged nearly 19 percent to $395.63 in early trading. That established a record high for a stock that debuted nearly 12 years ago when Netflix Inc. went public at a split-adjusted $7.50 amid the rubble of the dot-com bust. At that time, Netflix was strictly a DVD-by-mail service.

For the past six years, Netflix has focused on its online service that streams video over high-speed Internet connections. It has been reeling in more subscribers who are embracing a technology that enables them to watch movies and TV series anywhere they want on a wide variety of devices.

Netflix added more than 4 million subscribers during the final three months of last year, including 2.3 million in the U.S., and expects to gain another 3.8 million during the first three months of 2014. Both those figures were better than most investors anticipated, prompting several analysts to reconsider how big Netflix's $8 per-month streaming service might become.

At the end of December, Netflix boasted 44 million subscribers in more than 40 countries. Most of those customers — about 33 million — are in the U.S.

Sterne Agee analyst Arvind Bhatia estimates Netflix could have 100 million subscribers worldwide within the next five years. About 62 million of those customers are likely to be in the U.S., Bhatia wrote in a Thursday research note.

Netflix CEO Reed Hastings said he believes the Internet video service could have as many as 90 million subscribers in the U.S. alone, although he hasn't publicly set a timetable for hitting that target.

The Los Gatos, Calif., company also is still expanding into new markets. Netflix plans to offer its streaming service in another European country later this year. Analysts believe Netflix is has its sights set on Germany or France. Hastings declined to discuss where Netflix might go next during a late Wednesday video discussion of the company's fourth-quarter earnings, which rose sixfold from the previous year to $48 million. Revenue for the period rose 24 percent to $1.17 billion.

After Thursday's early leap, Netflix's stock backtracked a bit. Even so, the stock had still increased by $53.27, or 16 percent, to $387 in early afternoon trading. The stock nearly quadrupled last year, marking the best performance in the Standard & Poor's 500 index.