January 22, 2014 / 9:09 PM / 6 years ago

Netflix signs up 2.3 million U.S. subscribers; shares surge

LOS ANGELES (Reuters) - Netflix Inc added more than 2.3 million U.S. households to its TV and movie streaming service in the fourth quarter, pushing its profit above Wall Street expectations and sending its shares up 17 percent in after-hours trading.

The world’s largest video streaming company on Wednesday reported net income of $48 million for the quarter, up from $8 million a year ago. Earnings-per-share were 79 cents, Netflix said in a statement, beating the 66 cents average forecast of analysts surveyed by Thomson Reuters I/B/E/S.

The strong U.S. subscriber growth, a closely watched barometer of company performance, came in at the top end of Netflix’s forecast range. Netflix signed up 1.74 million new customers in foreign markets, bringing its worldwide total to 44.4 million.

Answering critics who question how big Netflix can grow, the company said it expected to add more U.S. subscribers in the first quarter of 2014 than in the year-ago period.

Netflix shares rose more than 17 percent to $391.77, eclipsing the all-time intraday trading high of $389.16 the stock hit in October.

Reed Hastings, Netflix’s CEO, discounted a recent U.S. court ruling on “net neutrality” that some analysts said might lead broadband providers to charge the company for quick delivery of its video content, possibly inflating costs for the company.

“Our economic interests are pretty aligned,” he said. Broadband providers want to sell higher-priced service with faster speeds, he explained, and need content for it from services like Netflix that work well with faster speeds.

The CEO didn’t comment on reports that it had talked to cable operators about agreeing to have Netflix accessed from their set-top boxes.

“People will use Netflix anyway, and I’d think (cable operators) would rather have them use it on their boxes rather than on Roku or some other box,” Hastings said.

“We expect this momentum to continue in Q1 with net additions of 2.25 million to exceed the prior year by about 11 percent,” the company said in its quarterly letter to shareholders.

Netflix also reported shrinking losses in international markets. “The international losses are going to subside and therefore show the strength of the overall streaming business,” said FBN Securities analyst Shebly Seyrafi, who rates Netflix “outperform.”

The company ended 2013 as one of the year’s highest-flying stocks, surging 297.6 percent, as investors bet the company would keep dominating the subscription video market and expand its roster of customers who pay $8-a-month for unlimited streaming of movies and TV shows.

In its letter, the company acknowledged it had been testing variations of the $8 monthly charge “at various price points.” The company said “eventually” it hoped to offer three pricing options “to fit everyone’s taste.”

It said it plans a “substantial European expansion” later this year, but did not disclose the markets it is eyeing. The company currently operates in Canada, Latin America, and seven European countries.

The Netflix logo is is shown on an ipad in Encinitas, California, April 19, 2013. REUTERS/Mike Blake

The company said “a prudent step” would be for it to raise $400 million in long-term debt. It raised $500 million last year.

Netflix is investing in original programming including “House of Cards” and “Orange is the New Black” to attract and keep subscribers. If faces competition from online video players like Amazon.com Inc and Hulu, plus on-demand content from cable operators.

For January through March, Netflix projected it would add 2.25 million U.S. customers, it told shareholders.

Reporting by Lisa Richwine; editing by Andrew Hay

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