Netflix wins back Wall Street, shares jump 42%


Netflix said it is evaluating potential new markets but does not plan to enter other countries in the first half of this year. Some critics had accused Netflix of expanding too quickly.

How many subscribers Netflix adds in 2013 will be key to its ability to pay Hollywood studios for movies and TV shows that are available on the Netflix streaming service. "That's still a key question for investors. We will see as we go through 2013 how strong the domestic streaming adds are," said Kessler, the analyst.

The dominant US video rental company saw shares reach as high as $304.79 in July 2011, just before it provoked a customer backlash with an unpopular price increase and other missteps. Netflix stock sunk to $53.80 in September 2012.

Firms that either raised their target price or upgraded their ratings on Netflix on Thursday included Wedbush Securities, Lazard Capital, Bank of Montreal, Macquarie, Janney Capital, Raymond James and Barclays.

Netflix had warned investors three months ago that it was likely to record a loss in the October to December period. But on Wednesday, Hastings said the company had underestimated the level of new signups over the holidays, when sales of tablets and Internet-connected TVs helped lift Netflix subscriptions.

In its earnings report, the company predicted it will add as many as 2.1 million US streaming members in the first quarter, more than it gained during the first three months of last year.

Macquarie analyst Tim Nollen upgraded Netflix to "neutral" and raised his price target to $120, from $50. The fourth-quarter results "puts our negative view to rest," he said in a note to clients.

But Nollen said "things to worry about" included competition in the video streaming market from rivals such as Inc and Coinstar Inc's Redbox.

"We still question Netflix's ability to drive (subscriber) growth to sustainably keep revenue ahead of content cost increases, and how Netflix can manage other operating costs like marketing and tech/development as well as it did in Q4," Nollen said.

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