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Netflix stock soars 16% on huge subscriber growth

Wednesday, January 22, 2014 - 5:42pm

- Netflix's blistering rate of growth continued in the fourth quarter of 2013. More than 2.3 million new American households signed up for the streaming service, its best quarterly performance in three years. 

In international markets, including Canada and Latin America, the service gained another 1.7 million subscribers, allowing Netflix to surpass the 10 million mark overseas for the first time. Overall, Netflix ended 2013 with over 44 million members, the company said in its quarterly letter to shareholders Wednesday afternoon.

Neflix's subscriber totals came in ahead of many estimates, causing the stock to rise sharply -- about 16% -- in after-hours trading.

Netflix's revenues were $1.2 billion in the quarter, up from $1.1 billion in the prior quarter, reflecting gains during the holiday season. Its net income was $48 million, up from $32 million.

For months now, there has been an active debate in media and investment circles about how big Netflix may or may not become. On Wednesday the company projected a gain of another 2.25 million subscribers in the U.S. and 1.6 million internationally in the first quarter of the year, which in both cases would improve on its first-quarter performance last year.

In their letter, Netflix CEO Reed Hastings and Chief Financial Officer David Wells called that a "great outcome," because even with 33 million members in the United States, the copmany still has "years of member growth ahead."

They attributed the fourth quarter's subscriber uptick to "service improvements, marketing effectiveness, and sales of Internet connected devices."

According to the company's quarterly filings, the last time it gained more than 2.3 million American subscribers in a quarter was during the first quarter of 2011. Back then, it added 3.3 million subscribers, but the comparison is inexact because its streaming and DVD-by-mail services were still linked.

Outside the United States, Netflix continued to operate at a loss due to expansion efforts, but it lost less in the fourth quarter -- $57 million -- than at any other time in 2013. The company projected that it'll lose $42 million in the first quarter of this year.

Confirming the suspicions of some investors, Hastings and Wells said Netflix plans later to launch a "substantial" European expansion later this year.

"Our success this year in international net additions and shrinking contribution losses confirms our belief that there is a big international opportunity for Netflix," they said


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