Good or bad for Tivo?

Netflix jumps as CEO touts streaming growth

By Benjamin Pimentel
Jul 5, 2012 13:12:21 (ET)

SAN FRANCISCO (MarketWatch) -- Shares of Netflix Inc. jumped on Thursday as an upbeat Facebook post by CEO Reed Hastings indicated continued growth for the company's online streaming service.

Netflix (NFLX, Trade ) was up nearly 13% at $81.39 by early afternoon -- hitting their highest level in two months.

On Tuesday afternoon, after the markets closed for the July 4th holiday, Hastings reported on his Facebook account that monthly viewing for the company's streaming service exceeded 1 billion hours "for the first time ever" during the month of June.

The number suggested a faster growth rate for Netflix, which last reported 2 billion hours of streaming for its entire December quarter. Netflix will report its full results for the June quarter on July 24, after the close of the market.

The post followed an earlier note from Citigroup reaffirming a buy rating on Netflix. Analyst Mark Mahaney cited a proprietary survey showing "overall customer satisfaction with Netflix has stabilized since March."

Mahaney did note that Netflix "remains one of the most controversial stocks" he covers, adding that customer satisfaction scores still remain well below their levels before what he called the "Apocoflix" last summer, when the company raised subscription rates and announced -- then killed -- a controversial plan to separate its DVD business.

"The Netflix pricing, product, and communication missteps clearly negatively impacted its customer satisfaction levels," Mahaney wrote. "But there is reason to believe that the largest part of the impact is behind us."

Netflix shares are still down more than 25% for the last three months -- and off more than 70% from this time last year.

On Thursday, Wedbush analyst Michael Pachter offered a less upbeat view of the stock, arguing that Hastings's post had a downside, given the flat fee the company charges for consuming online content. Pachter rates Netflix as a sell.

"The correct analogy is an all-you-can-eat buffet: If you heard that consumption of food at the buffet had increased by 50%, but that prices had remained the same, you would be concerned that the buffet was about to go out of business," Pachter said in e-mailed comments.

"Greater consumption of content is great for consumers, who get 35 hours per month for only $7.99, but it's horrible for content owners, who are stuck with all-you-can-eat content pricing until their contracts expire," he added.