Netflix Goes Bonkers After Stunning Q4

by Tom Taulli | January 23, 2013 5:45 pm

Well, Carl Icahn must be smiling right now.

Netflix (NASDAQ:NFLX[1]) was soaring more than 30% in early postmarket trading Wednesday following a blowout earnings report that no one saw coming.

NFLX flipped the script on analysts by reporting a fourth-quarter profit of $8 million, or 13 cents per share — the polar opposite of the Street’s expectations for a 13-cent loss. Those earnings — which were well below the year-ago period’s $35 million (64 cents) — came on revenues that improved 8% to $945 million, which also beat estimates.

The key driver for Netflix was growth in its subscriber numbers. In Q4, NFLX’s subscriber base grew by 2.05 million to 27.15 million, with about 1.81 million of those coming from outside the U.S. That’s important for NFLX, which has taken its fair share of criticism over its aggressive efforts in international markets; results like that could help to quell some complaints.

In the past few months, Netflix has been busy trying to put out another fire — lackluster content. To this end, the company has struck key deals with companies like Disney (NYSE:DIS[2]), Time Warner (NYSE:TWX[3]) and HBO. It also has seen gains from its own productions.

Yes, the challengers still mount. Companies like Comcast (NASDAQ:CMCSA[4]) and Amazon (NASDAQ:AMZN[5]) are turning into strong rivals who will not only make it tougher to get new customers but will continue to bid up content costs. But so far, Netflix has been able to manage through the pressures, and still has a strong position in the streaming market.

And Icahn?

He’s laughing all the way to the bank. Back in early November, the activist investor announced a 10% stake in Netflix[6], which was trading well below $70. Should NFLX open at its current after-hours price of about $137, Icahn will have nearly doubled his money since his announcement.

However, tomorrow will be too late for anyone not already in the stock. NFLX is enjoying a massive push right now, and seems to be factoring in not only surprisingly good results, but very optimistic views of the future.

So if you’re not already running with the herd, don’t try to catch up in the morning.

Tom Taulli runs the InvestorPlace blog IPO Playbook[7], a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook[8]” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders[9].” Follow him on Twitter at @ttaulli[10]. As of this writing, he did not hold a position in any of the aforementioned securities.

  1. NFLX:
  2. DIS:
  3. TWX:
  4. CMCSA:
  5. AMZN:
  6. announced a 10% stake in Netflix:
  7. IPO Playbook:
  8. How to Create the Next Facebook:
  9. High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders:
  10. @ttaulli:

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