Analyst says Netflix customers happier; shares up
LOS ANGELES -- Netflix Inc. shares rose Wednesday after an analyst said customer satisfaction is on the rise following the price hike last year that irked subscribers.
THE SPARK: Citi Research analyst Mark Mahaney said that more customers are satisfied with the movie streaming service, which shows that the company is starting to recover from a stiff price hike and aborted separation into two services last summer.
He cited better sentiment in Citi's quarterly survey of 3,800 U.S. Internet users, including about half that either had a Netflix subscription or are currently subscribers.
At the end of September, about 48 percent of current subscribers said they were "extremely satisfied" or "very satisfied" with the service. That's up from 44 percent three months earlier and 45 percent six months ago.
While the level is still below the 57 percent of people who gave the service exceptional reviews in December 2011, Mahaney said the bounce in sentiment off recent lows "gives us reason to believe that the largest part of the impact may be behind us."
THE BIG PICTURE: Netflix allows people to stream movies and TV shows on Internet-connected devices and computers for $8 a month. It also offers mail-order DVDs from a wider selection of titles at plans starting at $8 a month. At the end of June, Netflix had 27.6 million streaming video customers and 9.2 million subscribers of discs, although many of the disc subscribers are also streaming customers.
THE ANALYSIS: Mahaney says that he expects Netflix to earn $5.50 per share on its U.S. operations, which means that investors would be paying about 10 times U.S. earnings to buy the stock, while benefiting if the company's overseas expansion goes well. "That's highly reasonable," he said in an analyst note.
SHARE ACTION: Netflix shares rose $4.06, or 7.2 percent, to $60.52 in midday trading Wednesday. That's well below the 52-week high of $133.43 hit in February and down from its peak of $304.79 reached in July 2011.