Investors flocked to shares of Audible ( ADBL) on Wednesday, a day after the company narrowed its fourth-quarter loss and beat analysts' projections on both the top and bottom lines.

The audio book company's stock shot up 212% in recent trading, tacking on $1.73 to $9.68 in heavy volume.

The Street's reaction to the quarter was largely positive, with several Wall Street analysts boosting their ratings on the shares to buy. Still, at least one analyst said the huge price jump was likely due to the "proverbial short squeeze."

For the fourth quarter, Audible posted a loss of $700,000, or 3 cents a share, narrowing its loss of $2.2 million, or 9 cents a share, in the year-ago quarter. Analysts polled by Thomson First Call expected a loss of 7 cents a share.

Revenue totaled $23.3 million, up from $18.3 million in the same period a year ago and beating the $21.9 million analysts' consensus forecast.

Audible executives said late Tuesday that they are focusing on recruiting higher-paying monthly members, who pay a $15-to-$23 monthly fee with more benefits, rather than pitching a basic a la carte annual plan for $9.95 a year.

The shift in strategy makes sense, some analysts noted.

"Bookings per member increased in Q4 to $70.50/sub from $64.60/sub last quarter," wrote Jefferies analyst Ross MacMillan on Wednesday. "Success with the higher average revenue per user subscription plans are driving higher deferred revenue and net income."

"We believe the company will see margin expansion through calendar year 2008 as it migrates part of the 146,000 basic plan subscribers to higher-ticket subscription plans," he wrote.

MacMillan noted that free cash flow should grow 62% year-over-year in the next two years. In calendar year 2006, deferred revenue grew 120% to $14.4 million.

MacMillan raised his rating on Audible to buy from hold, and more than doubled his target price to $16 from $7.50. Jefferies makes a market in Audible.

Analyst Richard Fetyko of Merriman Curhan Ford also upped his rating to buy from hold, citing improving subscriber metrics, strong cash and an expanding addressable market, thanks to a boom in Apple ( AAPL) iPod sales and the coming iPhone release.

Fetyko does not own Audible shares but his firm makes a market in the company.

But while he was encouraged by Audible's improvement on the top and bottom lines in the fourth quarter, Standard & Poor's analyst Scott Kessler took an opposite approach and downgraded the stock from hold to sell, citing valuation, on Wednesday.

"They did a good job making sure expenses were relatively well controlled on technology and the sales and marketing line," Kessler said in an interview.

Still, he said the percentage of revenue committed to content and associated royalties continues to rise: 28% in 2003 to 31% in 2004 to 35% in 2005 and 41% in 2006.

As the company works to offer more content and services that people want, "they are being put in a position where they have to pay up for that," Kessler said. "That detracts from margins and profitability."

He's also doubtful of how much of a material effect the iPhone will have for Audible, at least in 2007. Kessler does not own Audible stock and his firm does not do banking.

Combining the upgrades and the general good feelings pushing the stock higher "forces the hand of those with a short position," he said, making the rise more dramatic.

Audible has stopped providing a financial outlook to investors and analysts, saying the new membership programs make it difficult to forecast results.

While the recent quarter did not have any "major discernable issues," Kessler said, the company "has disappointed investors somewhat regularly over the last few years."

The bullish sentiment "is a premature conclusion about the progress that the company might make."

More from Technology

One Chart Will Make You Even More Pumped Up to Buy Tech Stocks

One Chart Will Make You Even More Pumped Up to Buy Tech Stocks

IBM Shares Climb After Hours on Earnings Beat

IBM Shares Climb After Hours on Earnings Beat

Video: What to Expect From Microsoft's Earnings Thursday

Video: What to Expect From Microsoft's Earnings Thursday

Lee Munson: Not Peak FANG Yet

Lee Munson: Not Peak FANG Yet

Amazon's Cloud-Market Lead Is Being Threatened by Microsoft

Amazon's Cloud-Market Lead Is Being Threatened by Microsoft