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Netflix shares up ahead of 1Q earnings

The Associated Press

Netflix Inc. shares jumped Monday ahead of its first-quarter earnings report that is expected after the market closes.

THE SPARK: Investor will be looking closely at this quarter as Netflix has invested heavily in rights to movies and television shows to strengthen its Internet streaming service.

The entertainment company is trying to phase out its DVDs and eliminate the costs of buying and mailing those discs. Netflix has invested in original programming such as its popular "House of Cards" series, a political thriller starring Kevin Spacey.

THE BIG PICTURE: Netflix has added on costs associated with these new efforts, but investors will be eager to see if there are indicators that the investment is worth it in the long run.

Netflix has another high-profile series coming in May, the revival of "Arrested Development," which Fox cancelled in 2006 after three seasons. Subscriber gains from "House of Cards" could point to additional increases in the current quarter.

The company forecast in January that it would have 28.5 million to 29.5 million U.S. streaming subscribers by the end of the first quarter, but investors will be looking for that number to be at the high end of that range.

THE ANALYSIS: B. Riley analyst Eric Wold said he expects the first quarter will benefit from "House of Cards" and potentially exceed the company's conservative guidance for the period. He also said that if the company's profit improves sequentially, he would expect another rally in its stock price.

Wold upgraded his rating to "Neutral" from "Sell" and increased his price target on the stock to $165 from $90.

SHARE ACTION: Its shares rallied more than 6 percent Monday, adding $10.63 to reach $174, while the broader markets declined.

The company's stock tanked in 2012 and was trading near $93 at the start of 2013 but jumped to over $196 by February on some of its improvements. The stock is up 88 percent in the year to date.