A remarkable comeback by a stock we once referred to as
"America's Stupidest Company" has sent
to new heights.
The online subscription video giant added 1.3 million new
streaming customers last quarter, helping Netflix earnings beat
estimates and send the stock up more than 10% after hours. The
latest move has pushed Netflix to the brink of $400 per share
almost one year to the day after the stock fell to just $61.
Netflix shares have now risen more than 400% in the last
The latest round of stellar Netflix earnings included net
income that was four times what it was a year ago, a 22%
year-over-year revenue increase, and a fourth-quarter forecast
that well outpaced analyst expectations. Netflix also passed
another important benchmark: with 31 million U.S. subscribers,
the company now has more subscribers than the estimated 29
million HBO - the 41-year-old pay-VT channel - has.
My colleague and founder of this company,
, saw this coming. Netflix was his 2012 stock pick. He called it,
Buying America's Stupidest Company
." At the time, Netflix had been beaten down by a rash of very
public humiliations. Company CEO Reed Hastings tried
unsuccessfully to break the company into two websites, then
apologized for doing so in a late-night (and possibly drunken)
email to subscribers.
Netflix also jacked up its prices by 60%, further annoying
subscribers and prompting some of them to abandon ship. The bad
publicity pushed what was once a $300 stock all the way down to a
$63 stock. Netflix's fall from grace took only four and a half
But one of Ian's value investing principles is "
buy bad news
." And in the case of Netflix, he was right. The fundamentals of
what had made the company successful hadn't changed. Netflix was
still the dominant force in video, having put Blockbuster out of
business. And it was just scratching the surface of its potential
In the nearly two years since Ian recommended Netflix, the
stock has been one of the top performers on the market. The
company has recovered from Hastings' series of embarrassing
missteps, signed new streaming deals with major film studios such
as Disney, and expanded its subscriber base both in the U.S. and
Today's Netflix earnings are proof that the company isn't
slowing down anytime soon.