Netflix stock shoots up 42% on strong 4Q
SAN FRANCISCO — Netflix's roller-coaster ride on Wall Street surged to new heights on Thursday.
The company's stock climbed $43.60 to close at $146.86 as investors celebrated a fourth-quarter earnings report highlighted by accelerated growth in Netflix's Internet video service.
The 42 percent increase in Netflix's market value marked the stock's biggest single-day gain since Netflix went public more than a decade ago when investors were still shunning Internet businesses in the wake of the dot-com bust.
The last time that Netflix's stock came close to soaring like this occurred in October 2002 when the shares rose nearly 36 percent in a single session. That gain, though, wasn't quite as impressive, because Netflix's stock closed at a split-adjusted $3.55 that day. The meager valuation reflected widespread doubts about a quirky company trying to make money renting DVDs with a monthly subscription that delivered the discs through the mail.
Although it still operates its shrinking DVD-by-mail rental service, Netflix Inc. is now leading the way into a new era in home and mobile entertainment. The company's main subscription now streams movies and TV shows to any device with a high-speed connection.
Netflix's early success enthralled Wall Street until its CEO, Reed Hastings, irked subscribers 18 months ago by announcing the company was ending its practice of allowing them to get DVD rental and streaming services in a single package.
Customers who wanted to keep both options were hit with price increases of as much as 60 percent, triggering a customer backlash that started Netflix stock's jarring plunge from its peak of nearly $305 in July 2011.
Even after Netflix began to slowly regain disaffected subscribers last year, the company continued to lose its luster on Wall Street. The reason: Hastings had decided to forge ahead with costly expansion outside the United States and escalate spending to license more compelling material for Netflix's Internet video library, shriveling the company's profits. Even Hastings acknowledged the strategy might saddle the company with its first annual loss in a decade.
So many investors soured on Netflix that its stock sunk to a 52-week low of $52.81 just five months ago. The slide attracted opportunists such as billionaire investor Carl Icahn, who began accumulating a 10 percent stake in Netflix during early September when the stock was still trading below $55 because he thought the shares were grossly undervalued. That is looking like a savvy decision. At one point in Thursday's trading, Netflix stock hit a 52-week high of $149.17.
The market's sentiment about Netflix began to shift in early December when Netflix announced it had struck a licensing deal to begin showing the latest movies from The Walt Disney Co. beginning in 2016. Investors interpreted the agreement with one of the world's biggest entertainment companies as an endorsement of Netflix's staying power.
But it took Netflix's fourth-quarter report, released late Wednesday, to re-establish the company as stock market darling.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Smartphones expected to overtake desktops for holiday shopping
- Nutritional supplement makers, led by GNC, want to create voluntary safety standards
- Many Black Friday deals not worth the hassle
- Signs of steady U.S. economy: Pay, home sales up, unemployment applications down
- Take steps to make it harder for holiday hackers
- Union leaders warn Post-Gazette newsroom of possible layoffs
- Stocks finish flat before Thanksgiving holiday; energy firms give back some gains
- Covestro leader MacCleary finds stability amid change
- Existing-home sales fall 3.4% in October
- Collectors willing to overpay for silver, value ‘all in the eye of the beholder’
- Pfizer acquires Allergan in $160B deal