Netflix wins over analysts by adding customers

Thu Jan 26, 2012 6:40am EST

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(Reuters) - Netflix Inc's (NFLX.O) efforts to win back customers after its recent missteps was praised by analysts, after the online video and DVD rental company signed up more U.S. subscribers than expected in the fourth quarter.

Shares of the Los Gatos, California-based company rose to $112.50 in premarket trade on Thursday. The stock, which touched a year-low of $62.37 on November 30, 2011, closed at $95.04 on Wednesday on the Nasdaq.

Netflix, which outraged customers with a surprise price hike and a botched attempt to split off its DVD-mail service in 2011, added 610,000 net new subscribers in its home U.S. market, helping revenue leap 47 percent to $876 million.

Analysts at Citigroup, Barclays and J.P. Morgan Securities raised their price targets for Netflix, saying the customer growth may help alleviate investors' concerns about its ability to restart subscriber growth.

Citigroup also upgraded the stock to "buy" from "neutral."

The Netflix management acknowledged ongoing competition, including a potential standalone offering for Inc's (AMZN.O) video streaming product at a lower price and sustained increases in content spending.

But the growth trajectory for the business was improving, Barclays wrote in a note.

In a letter to shareholders, Netflix Chief Executive Reed Hastings shrugged off competition from and Hulu Plus and said both services offered far less content.

As the company shifts customers from its DVD-by-mail service onto instant streaming, Netflix has been writing ever-heftier checks to acquire more TV shows and movies for its streaming service.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Joyjeet Das)

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