SAN FRANCISCO — Netflix’s move to compete against traditional cable-TV channels with original programming is pulling in more subscribers to its Internet video service and winning back investors who doubted the company’s ability to develop distinctive entertainment.
The skepticism dissipated Monday with the release of Netflix’s financial results for the opening three months of the year.
The first-quarter numbers showed Netflix Inc. added 2 million U.S. subscribers from January through March — hitting the top end of the target set by the company’s management. The growth left Netflix with 29.2 million U.S. subscribers to an $8-per-month service that streams movie and TV shows to Internet-connected devices.
Those first-quarter gains, coupled with signs that Netflix’s profit margins are widening, delighted investors. The company’s stock soared $42.54, or 24 percent, to $216.91 after the results came out. If the stock rallies similarly Tuesday, it will mark the first time Netflix’s stock has topped $200 in 19 months.
Netflix’s stock had plummeted to as low as $52.81 in a stunning downfall that began in July 2011 when the company outraged its U.S. subscribers with pricing adjustments. The change resulted in a price increase of as much as 60 percent for customers who wanted Internet video and a DVD-by-mail option that ensured they would receive the latest theatrical releases. Investors also fretted as Netflix’s losses on an international expansion piled up and the company’s bills to license video mounted.
Now, it looks like Netflix CEO Reed Hastings — an object of scorn when the company’s stock was plunging — might have known what he was doing all along. In the process, he appears to have regained the luster that made him a Wall Street darling while Netflix’s stock was soaring toward its all-time high of nearly $305.
Netflix eked out a profit of $2.7 million, or 5 cents per share, in the first quarter. That contrasted with a loss of $4.6 million, or 8 cents per share, last year.
If not for the costs for refinancing some of Netflix’s debt, the company said it would have earned 31 cents per share. That figure topped the average analyst estimate of 18 cents per share. Revenue rose 18 percent from last year to $1.02 billion — about $7 million above analyst forecasts
Hastings envisions Netflix becoming as popular as any channel on cable or broadcast TV. To realize that goal, he decided Netflix should become more like Time Warner Inc.’s HBO channel and develop more series that can’t be seen anywhere else.
That was a big change for Netflix, which had primarily licensed content that have previously been shown in movie theaters and on traditional television networks.
Netflix took its first major leap in its new direction in early February with the debut of “House of Cards,” a critically acclaimed series made exclusively for Netflix. The series, starring Academy Award-winning actor Kevin Spacey, reportedly cost Netflix $100 million, amplifying fears the company was spending more than it could afford.