Netflix Inc won back Wall Street's affections on Thursday after adding more U.S. subscribers than expected in the fourth quarter, a rebound that prompted analyst upgrades and the company's biggest one-day stock jump in two years.
The Los Gatos, California-based company's shares soared 23.5 percent to $117.40 in afternoon trading. Shares had dropped to a year's low of $62.37 on Nov. 30.
Analysts at Citigroup, Barclays and J.P. Morgan Securities raised their price targets for Netflix. The fourth-quarter gain of more than 600,000 U.S. customers may help alleviate concerns about the company's ability to gain new business after a series of high-profile missteps, they said.
Citigroup also upgraded the stock to "buy" from "neutral."
Other analysts maintained their price targets, urging caution in the face of growing competition including a potential stand-alone offering of Amazon.com Inc's video streaming product at a lower price.
"We believe Netflix was a bit dismissive of the potential competitive threat here, but the degree of risk almost entirely depends on whether Amazon would approach such a service with its existing content library, or whether it would be willing to step up spending dramatically to acquire more content," JP Morgan analyst Doug Anmuth said in a client note.
He said that in the end, competition with Amazon would not be good for the shares of either company.
On Wednesday, Netflix management acknowledged the competitive landscape. In a letter to shareholders, Netflix Chief Executive Reed Hastings shrugged off the threat from Amazon.com and Hulu Plus and said both services offered far less content. The greatest competition will come from cable networks going mobile, he said.
Thursday's share gains represented the biggest one-day jump for Netflix since January 2010, when the stock rose 23 percent after better-than-expected earnings and a bullish subscriber forecast.
Netflix, which outraged customers with a surprising price increase and a botched attempt to split off its DVD-by-mail service in 2011, added 610,000 net new subscribers in its home U.S. market in the fourth quarter, helping revenue leap 47 percent to $876 million.
A contrite Hastings had promised that Netflix would lure back customers, and so far it has been even more successful than he forecast.
"You are never as smart or dumb as they say," Hastings said in a Wednesday interview. "We know we are just beginning to climb back in terms of consumer trust and affection."
The fallout from the earlier customer defections contributed to a 14 percent decrease in Netflix's fourth-quarter earnings.
Total U.S. subscribers stood at 24.4 million at the end of December, still below the 24.6 million the company boasted at the end of June.
Still, it would take a major positive run for Netflix to return to its former heights as a Wall Street darling, as recently as seven months ago when its shares peaked at $304 on July 13.
As the company shifts customers from its DVD-by-mail service onto instant streaming, Netflix has been writing ever-heftier checks to acquire more TV programs and movies for its streaming service. The company said it will operate with a loss for a few quarters this year while it expands in Latin America, Britain and Ireland.