Netflix hits target Q1 subscriber growth of 23.4M, but stock may not get a boost

Video streaming service Netflix hit its estimate of domestic streaming subscribers, with 23.4 million for the first quarter of 2012 — an increase of 1.7 million subscribers compared to the previous quarter, the company said in its latest quarterly earnings report.

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Netflix added three million streaming subscribers globally, for a total of 26 million subscriptions.

For Netflix, this is important for a number of reasons, including its credibility regarding future profitability. The company reported a loss of $0.08 per share on revenue of $870 million for the quarter, which is better than analysts’ estimates of $855 million (-$0.27 per share). However, the company anticipates returning to global profitability in the second quarter of 2012.

Netflix had a tough 2011, with a 60 percent price hike on combined streaming-and-DVD rental plans and a failed plan of splitting Netflix into two companies. The company was punished with a loss of more than half of its stock price. The stock appeared to have rebounded slightly in the last quarter with a better-than-expected subscriber growth boost. Now we’ll have to see if that trend continues.

Essentially, Netflix is trying to leverage the success of its domestic streaming business to grow other areas of the company. The company is dropping its focus on growing the DVD-by-mail rental portion of the business, and using the majority of its money to pay for streaming content deals and expand into foreign markets. And if subscriber growth was down, the stock may have dropped to a historic low.

“We are constantly improving our service with better personalization, better user-interfaces, better streaming, and more content,” Netflix stated in the earnings report. “As a result, per-member viewing hours set new records in Q1 and are on track to do so again in Q2, on a year-over-year basis.”

But just because streaming subscriber growth hit its targets for the second consecutive quarter, that doesn’t mean investors will be entirely satisfied. Earlier in the month, Barclays Capital Analyst Anthony DiClemente downgraded Netflix’s stock, cited rising costs and a number of emerging competitors as the main reasons.

We should hear more about the company’s future strategy after the earnings call later this afternoon. For now, check out the numbers from the Q1 report below or read the full report (PDF).

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