By Rex Crum, MarketWatch
SAN FRANCISCO (MarketWatch) -- Netflix Inc. claimed the tech
sector spotlight Tuesday as the Internet-based video-streaming
company's shares surged in the wake of an upbeat quarterly earnings
report and plans to increase prices for new subscribers in order to
help acquire more online video content.
Netflix (NFLX) shares rose 7% to close at $372.90 a share after
the company said late Monday that it earned $53 million, or 86
cents a share, on revenue of $1.27 billion for its first quarter.
During the same period a year ago, Netflix earned 5 cents a share
on $1.02 billion in sales. Analysts surveyed by FactSet had
forecast Netflix to earn 81 cents a share on revenue of $1.27
billion.
The company also said it added 2.25 million video-streaming
subscribers in the U.S. to meet its own forecasts, and ended the
quarter with 35.7 million domestic streaming members. International
subscribers grew by 1.75 million members to 12.7 million.
On a conference call to discuss Netflix's results, Chief
Executive Reed Hastings cited the impact of the company's original
series, and in particular the political drama "House of Cards"
among the factors in Netflix's subscriber growth.
"As has been the case for a while, [there are] a variety of
factors at play," added analyst Mark Mahaney of RBC Capital
Markets. "Strong execution, especially in international markets,
rising customer satisfaction, a larger installed base of connected
devices, the lack, so far, of a compelling alternative in most
markets, and the impact of original series."
Netflix also said it would raise the monthly fee for new
subscribers by $1 or $2 beginning later this quarter, but that
current customers would have their rates grandfathered in for "a
generous time."
Aaron Kessler, of Raymond James, raised his rating on Netflix to
outperform, or buy, from market perform and set a price target of
$450 a share on Netflix's stock. Kessler called Netflix's price
increase "modest" and said it should lead to improvement in content
and user growth.
"We believe price increases will enable Netflix to continue to
invest in higher quality content and thus attract more users,"
Kessler said.
(Read more about the growing rivalry between Netflix and cable
ISP giant Comcast Corp:
http://www.marketwatch.com/story/shades-of-apple-microsoft-in-netflix-comcast-griping-2014-04-22.)
With Netflix leading the way, most of the rest of the tech
sector also rose. Gains came from Facebook Inc. (FB), Pandora Media
Inc. (P), Microsoft Corp. (MSFT) and Micron Technology Inc.
(MU).
VMware Inc. (VMW), which was set to report quarterly results
after the close of trading Tuesday, rose 31 cents a share to close
at $105.15.
One of the day's notable decliners was printing-technology
company Lexmark International Inc. (LXK), which fell more than 11%
to close at $41.52
a share. Before the market opened, Lexmark reported
first-quarter results that exceeded analysts' estimates, but said
it expects its second-quarter sales to be down between 2% and 4%
from a year ago due to its exit from the inkjet printer
business.
More news from MarketWatch:
Apple, Microsoft are not the keys to this week's news
Xerox cuts full-year outlook as earnings dip
Shades of Apple-Microsoft in Netflix-Comcast griping
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