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Netflix shares rally as subscribers keep coming

Monday, April 21, 2014 - 02:01

Apr. 21 - Netflix may put a near 24 percent sell-off it behind it with shares rising after global subscriber growth tops 48 million, earnings beat predictions, and plans for higher new membership fees ease growth fears. Conway G. Gittens reports.

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If Netflix is any indication - get ready to ride the momentum train higher once again. The online streaming movie service not only beat earnings forecasts, but its global subscriber numbers topped 48 million, and the company announced it will charge new members up to two dollars more a month. Fears of a slowdown in growth, resulting in a 23 percent plunge in the stock since early March, were overblown and the stock should now rally, says Max Wolff of citizen.vc SOUNDBITE: MAX WOLFF, CHIEF ECONOMIST/STRATEGIST, CITIZEN.VC (ENGLISH) SAYING: "To me I really think it is the growth - getting above 48 million total subscribers, seeing 1.75 million outside the U.S. seeing another 2.5 million inside the U.S. basically it means they are going to keep being able to sell these, they are going to bowl through the new relationship with Comcast, hopefully forge one with Vodafone and it is a company that is going to keep doing the things it did to get a huge p/e (price-to-earnings ratio), so it isn't cheap, but get that big momentum going behind it again." There are some hurdles, however. Consumers don't respond well to price hikes. And then there's the merger in the works between Comcast and Time Warner Cable that could put Netflix at a price disadvantage when dealing with broadband providers who can hinder data speeds if they don't get the price they want. The cost of buying movies and TV shows are always a potential budget buster, although Netflix has insulated itself with big hits like House of Cards and other original programming. That may help when it comes to the rising threat of Amazon Fire TV and coming competitors. For right now, Netflix has the perfect script as it deals with that story line. SOUNDBITE: MAX WOLFF, CHIEF ECONOMIST/STRATEGIST, CITIZEN.VC (ENGLISH) SAYING: "They have the bigger numbers. They keep getting more sign ups. They are staying in front of everyone else. Without a doubt the new TV product from Amazon is going to allow Amazon to onboard more people to their streaming service. They haven't caught up yet but they are going to constantly threaten, so you got to see a Netflix stay nimble and stay ahead of the curve. This was a good quarter for that." And that was reflected in a 6-1/2 percent surge in after-hours trade, but buckle your seat belts, this stock is not for the faint of heart and typically swings wildly after quarterly results.

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Netflix shares rally as subscribers keep coming

Monday, April 21, 2014 - 02:01