A month ago, Netflix
The proof is always in the custard, and last night's fourth-quarter report was rich and creamy. Netflix delivered earnings of $0.87 per share on $596 million in revenue, while 3.1 million net new subscribers pushed the customer list above the 20 million waterline.
The stock is up 14% on the news, breaking all-time highs in intraday trading and rewarding investors with a spiffy-pop if they invested as recently as December 2008. Naturally, the short-sellers are hurting. In this light, it's hard to call Hastings "defensive" for engaging in the Tilson tussle.
This simple chart clearly reveals the core of the report:
Here, millions of new Netflix subscribers are doing a respectable impersonation of a blue hockey stick. Behold the fruits of an increasing reliance on digital video streams and fewer red DVD mailers. Hastings predicts an S-curve shape to his company's growth, in which case we just hit the rapid-growth part of that trend.
The 28-day delay that damaged Coinstar's
Finally, Hastings notes that Netflix video may indeed be a major consumer of Internet bandwidth to our homes, but that it doesn't create much of a load on the backbone infrastructure. Since the video streams are handled by the distributed networks of content delivery servers managed by Akamai Systems
I'm not surprised by any of this, except perhaps the vigor of the market reaction. Netflix is proving its business model to plenty of doubters, one quarterly report at a time.
I wonder if Whitney Tilson got any of his shorted shares out of harm's way. He did have fair warning, after all.
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Akamai Technologies is a Motley Fool Rule Breakers selection. Apple and Netflix are Motley Fool Stock Advisor recommendations. The Fool has written puts on Apple. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days.
Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.