Netflix Shares

Netflix Inc.'s video subscription service topped 20 million customers during the fourth quarter to help push its earnings beyond analyst expectations and burnish its reputation as a stock market star. Its shares surged nearly 9 percent on the news.

The results announced Wednesday are the latest evidence of Netflix's increasingly important role in the distribution of home and mobile entertainment. As Netflix's influence has risen, so has its stock price. The shares tripled last year to give Netflix a higher market value of nearly $10 billion — more than some of the studios that supply the content for its DVD-by-mail and Internet video streaming service.

The lofty valuation has intensified the pressure on Netflix to keep attracting subscribers at a rapid pace.

Netflix delivered in the fourth quarter by reeling in 3.1 million subscribers, by far the most during any three-month period since its service launched in 1999. The performance also exceeded the most optimistic predictions of its own management.

The company, based in Los Gatos, Calif., believes the current quarter could be even better. It expects to gain as many as 3.7 million more subscribers in the U.S. and Canada by the end of March.

Netflix shares soared $16.07 to $199.10 in Wednesday's extended trading after the results were released. The stock finished the regular session at $183.03, down $3.71.

In a departure from its past practice, Netflix didn't provide a full-year forecast, partly because executives say it's becoming more difficult to accurately forecast the company's rate of growth over such an extended period. For instance, Netflix began 2010 with a projection calling for the addition of 3.6 million subscribers during the full year and wound up picking up 7.7 million.

Another variable clouding the outlook: Netflix unveiled plans to enter its second international market during the second half of this year after expanding into Canada last fall. The company didn't identify which new market it's targeting, but said it anticipates an operating loss of about $50 million on its international operations in the second half of the year.

The Canada service is supposed to start making money during the third quarter.

Netflix Inc. earned $47.1 million, or 87 cents per share, during the final three months of last year. That was a 52 percent increase from $30.9 million, or 56 cents per share, last year.

Analysts surveyed by FactSet expected earnings of 71 cents per share.