Netflix shares surged 17% on Wednesday as Wall Street was encouraged that a jump in subscribers will help the streaming giant’s strategy to grow overseas.
The stock rose $60.48 to $409.28 a day after Netflix reported earnings that surpassed analysts’ projections. Investors were energized that the Los Gatos, Calif., company added 4.33 million users during the fourth quarter, well above the projected 4 million.
Part of the uptick can be attributed to its global expansion.
About 2.43 million non-U.S. users signed up for Netflix in the quarter, a 40% increase from a year earlier. Netflix has recently entered parts of Western Europe in September, and plans to launch service in Australia and New Zealand in March.
But Netflix foresees an end to its global expansion in the next two years, with an eye toward profitability, saying it expects "to generate material global profits from 2017 onwards."
This year will be one to watch.
Amazon raised the stakes this week by announcing it would start producing feature films. And HBO, one of Netflix's main competitors, plans to launch a stand-alone, over-the-top version of HBO Go -- a development that analysts say could be a threat to Netflix's growth.
"CEO Reed Hastings has downplayed this as he believes both services could thrive concurrently," Sterne Agee analyst Arvind Bhatia wrote in a report. "We think [Netflix] will do well but we are less sure of its potential subscriber growth rate. It will be interesting to see at what price HBO launches its service."
The average price projection on the stock is roughly $450. The company reached a 52-week high in September when shares peaked at $489.29, a month before its disappointing third-quarter results.
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