Netflix Inc impressed Wall Street with a surprisingly strong holiday quarter that eased near-term concerns about its costly international expansion and its movie and TV bill, sending its shares skyrocketing 42 percent.
The jump represented the largest single-day gain from Netflix, though shares were still trading at just under half their record of more than $300 in July 2011, when the company was celebrated on Wall Street for pioneering a video service that rocked the traditional media industry and Hollywood.
On Thursday, a string of industry analysts upgraded Netflix shares or raised their price targets after the company reported better-than-expected quarterly profit and strong subscriber growth around the world. Many said Wednesday's report of an $8 million fourth-quarter profit signaled a turnaround for the company, even though risks remained.
"The worst is behind them," said Raymond James analyst Aaron Kessler, who raised his Netflix recommendation to "market perform." "The margins are much better, they are getting better marketing efficiency, the content spend is slowing."
Shares of Netflix rose $43.60 to $146.86 on Nasdaq on Thursday, their highest level since September 2011.
One of Netflix's biggest shareholders, activist investor Carl Icahn, saw a massive gain since he began buying shares in September. Icahn's nearly 10 percent stake, bought for $321.4 million, has increased to $807.7 million based on Thursday's closing share price.
When Icahn disclosed his stake in October, he said he felt the company was an attractive takeover target.
"We have no further news about his intentions, but have had constructive conversations with him about building a more valuable company," Chief Executive Reed Hastings and Chief Financial Officer David Wells said in a quarterly letter to investors on Wednesday.
Even with Wall Street's newfound optimism, several analysts were seated in the neutral camp, waiting to see how Netflix will fare over the rest of the year amid growing competition. The company forecast subscriber gains for the first three months of 2013 but did not give guidance beyond that.
Netflix said it is evaluating potential new markets but does not plan to enter other countries in the first half of this year. Some critics had accused Netflix of expanding too quickly.
How many subscribers Netflix adds in 2013 will be key to its ability to pay Hollywood studios for movies and TV shows that are available on the Netflix streaming service. "That's still a key question for investors. We will see as we go through 2013 how strong the domestic