Netflix Roller Coaster Ride Continues With Latest Earnings Report

In the last quarter of 2011 Netflix’s stock started to take a beating, a beating that lasted throughout the entire year of 2012, but then something happened happened early this year (2013) — NFLX jumped from around $90 per share to over $169 per share in less than a month. Since that time the stock has been steadily rising as investors are pleased with the company’s earnings and business.  At the time I’m writing this article the stock is sitting at $391 in after hours trading as Netflix meet Q3 expectations on revenue ($1.1 billion) and beat on earnings per share (52 cents per share).

The funny thing about investors and Netflix stock is that it seems there is never any middle ground.  Investors either love it or hate and because of that sentiment the stock can be very volatile.  I just never understood why that is the case.  In April 2011 I wrote an article where I asked why analysts and investors aren’t jumping on the Netflix bandwagon, at that point in time the company still hadn’t released its planned House of Cards show and was in the process of rolling out internationally — two things that proved to be very beneficial as I expected.  Because of that it seemed like the perfect time to get into the stock, but everyone ended up jumping ship and as I mentioned the stock suffered in 2012.

However, now with a couple of hit TV shows under its belt including House of Cards and Orange Is The New Black, as well as domestic and international expansion going well (the company added 1.3 million U.S. subscribers and 1.4 million overseas subscribers in Q3), it’s easy to why everyone is jumping back onboard.  But will they stick around this time?

Reed Hastings left this note at the end of his letter to investors:

“In calendar year 2003 we were the highest performing stock on Nasdaq. We had solid results compounded by momentum-investor-fueled euphoria. Some of the euphoria today feels like 2003.

Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we’ve continued to grow our membership every year fairly steadily. We do our best to ignore the volatility in our stock. The progress we’ve made over the last 10 years is stunning. We want to make the next 10 years even more remarkable.”

Translation:  “Calm down a bit, we’re doing well and will continue to grow.”

That growth is being fueled in part due to the company’s original programming, which has received great press coverage and social buzz, as well as Emmy nominations.  But a majority of viewing is still from content that isn’t original to Netflix, including Breaking Bad and The Walking Dead.  I mean, if you are going to binge watch, that’s clearly where you should start, right?

Netflix also has a great devices strategy, the company offers apps for many devices including the iPhone, iPad, Apple TV, Xbox, PS3, and more, which makes it easy for subscribers to access content wherever they are.  And now with the recent rumors that Netflix may make its way onto cable set-top boxes, that’s just one more place for your viewing pleasure.

What I’m saying here is that Netflix is doing well — regardless of its stock price.