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It was easy to bash Netflix (Nasdaq: NFLX  ) when it was down last year. The popular video service is in a better place now, but subscribers are apparently quicker to forgive than shareholders.

Speaking at a JPMorgan conference, CFO David Wells had some encouraging comments about both the current quarter and its ability to win back users who had previously cancelled the service. "The improvements in retention and our growth in Q1 and Q2 since Q3 and Q4 of last year make us feel pretty good," he said.

If you didn't catch that, he's confirming that there is growth here, midway through the company's second quarter. Wells also revealed that a third of the company's new subscribers are folks rejoining after having cancelled Netflix over the past year.

Users are coming back. Where are the investors?

Looking back in anger
A lot of people left in disgust during last summer's pricing change and short-lived Qwikster fiasco, and Netflix paid the price. The stock that poked its head above $300 last July has gone on to shed more than two-thirds of its peak value.

Netflix shares are closing in on a two-year low. There's a disconnect between investors and users of the service, and the former isn't paying attention to the latter.

The wave of defections during last year's third quarter was brutal, but Netflix is exactly where it wants to be these days. It closed out the first quarter with nearly 30 million subscribers worldwide, and all but 3 million of them are streaming.  

DVD renters are still leaving, and Netflix is fine with that. Coinstar's (Nasdaq: CSTR  ) Redbox is proof that there's money to be made with cheap disc rentals, but even the popular disc-flinging kiosk service plans to introduce a digital service later this year.

Netflix is growing -- domestically and abroad -- on the streaming end. That's the company's future. The growing audience validates the strategy, and Netflix's insistence on sticking to its $7.99-a-month price point, even if it upsets studios that want Netflix to charge more or introduce different pricing tiers, is resonating with video buffs.

Streams come true
Netflix closed out the first three months this year with 3 million more streaming accounts than when the quarter began. If we go by Wells' comments, a million of those new members were people who nixed the service last year. If we go by gross additions, the figure will be even higher.

This is huge.

Some may have tried rival services, though there isn't really a lot out there at the moment. Comcast (Nasdaq: CMCSA  ) and DISH Network (Nasdaq: DISH  ) have fledgling add-on streaming content, but only for Web-enabled users who are already paying a princely sum for cable or satellite television.'s (Nasdaq: AMZN  ) Prime is cheaper -- and that's with welcome goodies including free two-day shipping on Amazon-stocked merchandise and free monthly Kindle rentals from a select library -- but the selection makes Netflix seem more than adequate in comparison.

It's true that investors overestimated Netflix's potential last summer. We didn't know that the company would have to spend so much money to expand overseas. We also saw the dual-plan pricing as an opportunity to grow revenue per user, even though now we realize that it's a slow crawl down to $7.99 a month.

However, the same disconnect that saw investors cheering as subscribers were jeering -- the stock went on to hit its all-time high several days after Netflix introduced its new pricing strategy -- finds both parties switching places.

Subscribers are cheering. Investors are jeering. We know which group was the better indicator of which way Netflix's stock was heading then. Why can't the same group be right again -- with Netflix's stock moving higher?

The customer's always right.

Stream on
Motley Fool co-founder David Gardner has been a fan of Netflix as a disruptor for nearly a decade, but there's a new Rule-Breaking mutlibagger that's getting him excited these days. Learn more in a free report that you can check out right now.

The Motley Fool owns shares of Netflix and Motley Fool newsletter services have recommended buying shares of Coinstar, Netflix, and The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He owns no other stocks mentioned in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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