UPDATE 3-Netflix posts higher-than-expected Q2 results

* Q2 EPS 54 cents vs 50 cents expected by analysts

* Shares dip in after-hours trade

* Raises earnings, revenue, subscriber forecasts (Adds analyst and CEO quote from conference call)

By Sue Zeidler

LOS ANGELES, July 23 (Reuters) - Netflix Inc (NFLX.O) posted better-than-expected earnings on Thursday, helped by continued strong subscriber growth, and the online DVD rental company raised its full-year forecast.

Netflix, which has grown at a fast pace over the past two years and has seen its stock price soar 59 percent since the start of the year, now expects to end 2009 with 11.6 million to 12 million subscribers, versus previous forecasts of 11.2 million to 11.8 million subscribers.

"This is as solid an earnings report as you can have. The big challenge for them will be in maintaining this success, but it seems they can do that for a while. They're executing well and have no real competition other than Blockbuster Inc (BBI.N) and kiosks," said Edward Woo, an analyst at Wedbush Morgan Securities.

Youssef Squali, an analyst with Jeffries & Co, agreed. "The big take away is that company's core business performance is strong and that the competitive landscape remains favorable to Netflix," he said.

The company's shares were down slightly in after-hours trade after initially rising 3.7 percent to $48.20 a share, from a close of $46.46 a share.

Netflix, with a subscription model and an easy-to-use online mailing service that sends DVDs to customers in signature red envelopes, has eroded much of brick and mortar Blockbuster's business over the past few years.

On a conference call on Thursday, Netflix Chief Executive Reed Hastings said that while Coinstar Inc's (CSTR.O) fast-growing DVD kiosk company Redbox, which rents movies for $1 per night, is doing well, Netflix has no incentive to go into kiosks and will continue putting all its innovation efforts into its streaming service.

He said Netflix continues to see rapid growth for Redbox and an offsetting decline in video store rentals.

"Essentially, both Netflix and Redbox are going at the expense of video stores," he said.

Analyst David Miller, of Caris & Co, said he did not view Redbox as serious competition for Netflix.

"In my opinion, the value proposition really isn't there," he said, noting that for a flat monthly fee, Netflix members, generally get more usage and selection than when renting DVDs at $1 a day from Redbox kiosks.

Squali attributed the stock run-up in Netflix over the past few months to perceptions that Netflix was a good "recession play."