Netflix (NFLX) got out to a great start in 2013, after posting a surprise profit in January vs. expectations of a loss. The streaming video giant had invested big in international growth and new original programming, and it appeared to be paying off. Shares soared about 60% in just a few weeks on the results.
But that was only the beginning.
Bearish investors shorting Netflix stock were forced into submission, driving the stock higher, and following earnings reports showed that brisk growth has continued — and that quick gain to start the year has continued to make Netflix the best stock of 2013 so far.
The icing on the cake? Original show House of Cards starring Kevin Spacey won an Emmy — proving that NFLX isn’t just about subscriber growth but is also about content creation.
Of course, whether the gains can be sustained is anybody’s guess. Competition is heating up from Amazon.com (AMZN) with its Prime Instant Video, joint venture Hulu Plus and even paid YouTube channels gaining momentum. And even if Netflix can hang on to its market share, the fact that Netflix is valued at almost 100 times next year’s profits is enough to give new investors pause.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at email@example.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.