Netflix, Streaming Service | featured news

Netflix Inc. (NFLX) added 1.74 million streaming subscribers in the U.S. during the first quarter but failed to satisfy investors' concerns about the video delivery company's ability to grow its business.

The loss of its contract with Starz for movies may hurt Netflix less than originally thought, because more than half of its streaming audience are watching TV series.

Netflix says it will stream certain movies from The Weinstein Co., including "The Artist," under an exclusive licensing agreement.

Netflix Inc won back Wall Street's affections on Thursday after adding more U.S. subscribers than expected in the fourth quarter, a rebound that prompted analyst upgrades and the company's biggest one-day stock jump in two years. The Los Gatos, California-based company's shares soared 23.5 percent to $117.40 in afternoon trading. Shares had dropped to a year's low of $62.37 on November 30.

Our current estimates imply that Netflix may have more or less maintained domestic streaming subscribers in Q4 of 2011 and may have grown internationally. Our price estimate for Netflix stands at $126, implying a premium of more than 30% to the market price.

Netflix’s stock rose by about 10% last week before falling lower, driven by rumors about potential acquisition by Verizon. While reports indicated that Verizon may be seriously considering the acquisition at around $4.6 billion, the company denied that it has organized any talks or meetings with Netflix. We think that Netflix will not sell itself at the implied price per share that results from $4.6 billion bid. For details see Verizon Would Have a Tough Time Acquiring Netflix which talks about why an acquisition at stated value is unlikely, be it by Verizon or another potential suitor Amazon. In general, several analysts including Trefis analysts see any acquisition as highly unlikely.

Verizon may not have had much bargaining power with its currently minimal streaming subscriber base, but a partnership will help Verizon leverage Redbox's established relationship with content providers to get more favorable deals. This could lead to less of an impact on gross margins than had it decided to go alone.

Georg Szalai With other industry moguls in the audience, he also tells an annual UBS investor conference that advertising trends in the first quarter of 2012 feel stronger than in the current fourth quarter. read more

Wedbush analyst Michael Pachter says that increased content costs, a precipitous decline in subscribers, and a 'growth at all cost' mentality will continue to hurt Netflix in the future. Read this blog post by Don Reisinger on The Digital Home.