I couldn't be happier to eat crow.
I was concerned that Netflix
When Netflix found itself on pace to top its subscriber targets two years ago, it issued a press release to indicate as such by the end of September 2005. With a sea of crickets chirping at Netflix, I was braced for the ordinary -- and the grim possibility that the sector had peaked back in June.
I was wrong, and crow is a lot tastier than I imagined.
Netflix closed out the quarter with 7.03 million subscribers. That's a 24% improvement over last year's third quarter and a 4% sequential improvement over this year's Q2. (You can brush up on last quarter here.)
Things aren't perfect, however: Gross margins fell, and revenues posted a sequential decline. Whether it's the higher costs behind new initiatives -- such as its online streaming service -- or a matter of patrons flocking to lower-priced plans, shareholders can gladly stomach it as Netflix pursues a wider user base.
Earnings climbed 23% higher to $0.23 a share, or $0.26 per share on a non-GAAP basis. No matter how you fancy your profit flavors, Netflix obliterated Wall Street's bottom-line target of $0.15 a share.
It's certainly a good time to be Netflix. Companies from Apple
We'll still have to wait until Blockbuster's report before we can gauge the growth of the sector, but Netflix is starting to sound upbeat again. It even raised its guidance for a change.
The company is now looking to close out the year with 7.3 million to 7.5 million subscribers and to earn between $0.83 a share to $0.90 a share on $1.2 billion in revenue for all of 2007.
As a Netflix shareholder and subscriber, I don't mind when my crow is served sunny-side up. Yum, yum!
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Longtime Fool contributor Rick Munarriz has been a Netflix subscriber -- and shareholder -- since 2002. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.