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Netflix, Inc. Crushes Q4 Targets, Hints at Big Changes; Shares Skyrocket

By Anders Bylund - Jan 22, 2014 at 4:51PM

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Netflix delivered on lofty expectations in the fourth quarter and outlined a bevy of new strategies for the year ahead. Shares skyrocketed as much as 18% on the news.

Shares of Netflix (NFLX 2.72%) spiked as much as 18% higher in after-hours action, following the release of Netflix's fourth-quarter results.

The digital video pioneer added 2.3 million new members in the domestic market and 1.7 million new subscribers abroad, at the high end of management guidance in both cases. On the bottom line, Netflix reported GAAP earnings of $0.79 per share, easily ahead of the $0.66 average analyst target.

The company hinted at introducing new pricing plans at some point, and also said that the DVD plan is about to become separated from Netflix streaming in the company's marketing materials under the banner. If pricing policies do change, existing members will be able to grandfather their current plans for two years.

The Irish market saw this kind of change after the close of the fourth quarter. Netflix said the Irish update won't affect revenues and margins will not change for a long time, as only new subscribers are affected. It's also "too early to tell" what effect, if any, the extra euro per month will have on subscriber additions in Ireland.

International contribution margins are moving closer to breakeven, which means that Netflix is becoming comfortable with further international expansion. The company will make another "substantial" push into Europe later this year.

Regarding the recent net neutrality battles, Netflix noted that Verizon (VZ 0.83%) disarmed the U.S. net neutrality framework. But the company doesn't see a big threat in potential network fees. "The most likely case," the press release said, "is that ISPs will avoid this consumer-unfriendly path of discrimination. ISPs are generally aware of the broad public support for net neutrality and don't want to galvanize government action."

The $395 after-hours high is a fresh 52-week and all-time record for the stock.

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

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