Netflix (NSDQ: NFLX) stock jumped over 20 percent, with a number of equity analysts bumping up the movie rental company’s price target following its better-than-expected fourth quarter earnings report.
As of late-day trading on the Nasdaq, the stock was up about 23 percent to $117.17 – that’s also up about 27 percent from where Netflix stock was priced at Wednesday’s opening bell.
Given Netflix’s precipitous autumn plunge from a price zenith of nearly $300 a share in July — the result of an ill-fated price hike and aborted attempt to spin off its DVD business — “rebound” might be too strong a word. But equity analysts seemed to have like what they saw Wednesday. Analysts at Citigroup upgraded ratings for Netflix from “neutral” to “buy,” while setting a price target at $130 in a note to investors Thursday. In its own investor missive, Oppenheimer also raised its price target to $130, while issuing an “outperform” rating.
There were still some areas of concern, though. Citing factors that came out in Wednesday’s conference call with top Netflix officials – notably, a slower than expected launch in Latin America – equity analyst Sterne Agee’s Arvind Bhatia contends that the recent run-up of the stock may have it priced too high. Last summer, Netflix announced that it would expand into Latin America, which has broadband penetration rates that are about four times higher than Canada, according to the company. Netflix highlighted plans to launch in 43 countries in Latin America and the Caribbean with hopes that this expansion would go as smoothly as its transition into Canada in 2010.
But in a conference call with investors Wednesday, Netflix CEO Reed Hastings conceded that this southern infiltration is going slower than had been anticipated. He said a “lack of device penetration” and little “U.S. halo effect” has made the expansion go much more slowly than in Canada. As a model, Hastings cited DirecTV’s launch of its Latin American service several years ago, a process he said took about two years to get off the ground.
Overall, Netflix told investors Wednesday that it had added 380,000 foreign subscribers in the fourth quarter and that its total now stands at 1.86 million. The company’s international operations lost $60 million for the period.
Some other Netflix news that flowed from Wednesday’s call:
– Not only do customers have to wait 56 days after a disc premieres to rent DVD and Blu-ray titles from Warner Bros. (NYSE: TWX), they have to wait 28 days just to put those movies in their queue. The Los Angeles Times confirmed that this is part of Netflix’s new agreement with Warner that goes into effect Feb. 1.
– Netflix plans to put some work into its user interface, developing features, for example, that create separate movie queues for parents and children. In other words, mom and dad can cull from a selection of adult dramas without having to scroll through Power Ranger episodes.
– Hastings explained Netflix’s strategy of releasing all first-season episodes of its first original series, Lilyhammer, at once. The traditional TV model, of course, is to trickle them out one at a time and let the buzz build: “The Netflix brand for TV shows is really about binge viewing,” he said. “It’s the ability to get hooked and watch episode after episode.”
– Meanwhile, asked if Netflix would consider bidding on current episodes of television content, Hatings said he has no interest in getting into a “cord-cutting battle” with cable networks and would continue to offer complete episode collections of prior seasons.