The stock price of Netflix, Inc. (NASDAQ:NFLX) surged nearly 40 percent ton Thursday, as the online video streaming company reported $945 million in revenue and $8 million net income or $0.13 earnings per share for the fourth quarter of 2012. The result was higher than its $476 million revenue during the same period in 2011.
The company’s financial result is higher than the $934.7 million revenue and $0.12 loss expected by analysts, based on the data from FactSet.
Netflix, Inc. (NASDAQ:NFLX) said more than 2 million subscribers were added by the end of 2012. The company has more than 27 million subscribers in the United States. Globally, the company has 33 million members.
According to the financial statement of Netlix Inc (NASDAQ:NFLX), its domestic paid subscription in the fourth quarter was 25.47 million and international paid subscription was 4.89 million. Its contribution margin increased from 10.9 percent, during the same quarter a year earlier, to 18.6 percent due to higher than expected members and revenue as well as lower than forecasted content delivery costs.
Netflix DVD membership declined to 8.2 million, lower than its expectation. According to the company its DVD segment generated $128 million as profit during the fourth quarter. The company expects its DVD contribution margin to decline in the first quarter this year.
The company said the increase of voluntary and involuntary retention during the quarter were driven by improvements in its payment process, service and content relative to a broad array of video choices for consumers.
During the fourth quarter, Netflix signed an agreement with Warner Bros to stream the complete, previous seasons of Revolution and Following, exclusively. Both dramas are on NBC and Fox.
In terms of competition, the company said it is has a superior content offering because it has a larger budget and further experience curve in improving its user interface and delivering quality streaming. Netflix was recently launched on Windows 8, which works with both keyboard/mouse and touch screen.
Netflix, Inc. (NASDAQ:NFLX) expects its net additions for the first quarter of 2013 to be slightly higher than its net additions of 1.7 million a year ago. The online video streaming company also expects to deliver a relative flat quarter-over-quarter net income in Q1 due to an anticipated decline in DVD profit margin.
Investors are happy with the strong quarterly results of Netflix, Inc. (NASDAQ:NFLX). Carl Icahn is definitely one of the happiest investors of Netflix. The activist investor owns 10 percent stake or more than 5.5 million shares in the company. According to the company's letter to shareholders, Icahn purchased his stake at $58 per share, therefore, its total value was around $321.4 million. With the current stock price of Netflix, Icahn's stake in the company is approximately $748 million. That's a big gain.
Credit Suisse equity research firm lowers its rating on Netflix, Inc. (NASDAQ:NFLX) shares from Outperform to Neutral on valuation, even as analysts dial in increased Domestic and International subscriber growth estimates and credit the company with the resulting profitability ramp that the business model had always promised. What has not changed is Netflix’s longer-term opportunity given the proliferation of connected devices, the company has exhibited one of the benefits of that trend on the 4Q12 result as it showed material operating leverage on the marketing line as its mobile app was undoubtedly one of the anchor downloads/installs for the incremental smart phone or tablet owner.
Netflix stock is up 38.48 percent to $143 in pre-market trading.