Updated from Nov. 17
surged after boosting subscriber growth goals.
The Los Gatos, Calif., DVD rental service boosted its quarter-end subscriber target Wednesday by 150,000, to around 2.55 million, citing a price cut the company rolled out last month in the face of mounting competition.
In Thursday's premarket, the stock was up $1.53, or 14.6%, to $11.99.
Netflix said the sub gains will boost fourth-quarter revenue a bit, but that those gains could, ironically enough, hurt profits. That paradox points to one of short-sellers' many criticisms of Netflix: Because the company collects only a flat monthly fee from its customers, the more avidly they use the service, the costlier it is for Netflix.
Netflix investors confronted that particular wrinkle early last month, when Netflix actually
boosted guidance because users had ordered fewer movies than expected, owing in part to the Summer Olympics.
Still, investors liked the growth news. Wednesday's remarks come just a month after Netflix
slashed its fees by nearly 20% to fend off a charge from rivals like
. That move resulted in investors hammering Netflix to the tune of a
39% next-day selloff.
"We're impressed with the demand for our service at our new price points," CEO Reed Hastings said. "Although it is still early in the quarter, subscriber growth is exceeding our earlier expectations, churn appears to be heading toward historical lows, and U.S. SAC
subscriber acquisition costs should be in the neighborhood of last quarter. The strategy of rapid subscriber growth we announced last month is working."