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Nothing But Netflix

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Shares ended up by roughly 15% to top all S&P 500 advancers.

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It seems plenty of people are opting to buy an online movie rental outfit. Shares of Netflix (NFLX) ended up by roughly 15% to top all S&P 500 advancers after a profit report that is being unanimously described as "blockbuster," as if to cruelly twist the knife at its crestfallen competitor in Chapter 11.

Today's all-time high takes its 12-month gain to more than 300% and follows an undeniably impressive fourth quarter. Earnings were up 52% to $47.1 million at the 14-year-old California outfit, with EPS of $0.87 well ahead of consensus calling for only $0.71. Subscriber growth is also going gangbusters, with 3.1 million net new additions for a 63% annual gain as its streaming film option proves increasingly popular.

As if on cue, analysts have since moved in lockstep to lift earnings estimates, price objectives, and in several cases overall ratings. A by no means exhaustive list of brokerage boosts includes Bank of America-Merrill Lynch, Barclays, Canaccord Genuity, Caris, Jefferies, JP Morgan, Morgan Keegan, S&P, ThinkEquity, and…oh I could go on but it may ultimately be easier to just further bolster the firm's bottom line by ordering March of the Penguins on its website, since the film provides such a stellar example of the sort of herd mentality currently under discussion. Certainly the only creatures enjoying our current blizzard conditions more than those arctic birds must be Netflix executives, for there's obviously a whole lot of wintry weather nesting going on as people stay at home and huddle around their TV or, increasingly, PC, to try out new video offerings. JP Morgan researcher Imran Khan ebulliently echoed the view of many on Wall Street when he wrote in a note, "They did it again!"

Short covering is undeniably a big factor in today's move and those who foresee a horrible Hollywood ending ahead can point to a stock now trading at 15 times expected forward earnings. Higher content costs and increased competition from Amazon.com (AMZN), who a week ago bought British rival LoveFilm for around $320 million, are also worth watching. While the law of large numbers gets us all in the end however, even now Netflix has only penetrated about 20% of all households. The company's checks may therefore be joining its DVDs in the mail for some time to come.

Much like those penguins, please form an orderly line as you queue up Netflix's Rapid Growth Is Close to Overwhelming Current Broadband Capacity, YouTube and Netflix Illustrate Modern Romance, Infidelity, and Blockbuster Loses Its Only Advantage.

Among the supposedly mortal threats Netflix beat back was video on demand, but this afternoon's strong stock performance from one provider of such services shows corporate America isn't always a zero-sum game. Time Warner Cable (TWC) shares are up more than 2% to a fresh 52-week peak following impressive fourth-quarter earnings of its own.

Net income increased 22% to $392 million, while EPS of $1.09 easily beat Street estimates of a dollar even. CEO Glenn Britt lauded last year's "great strides financially and operationally in 2010″ at the country's second-largest cable company. (The biggest, Comcast (CMCSA), is literally only hours away from formally owning CNBC, so analysts at the station that bills itself "First in business worldwide" can today at least trumpet its rival's results without fear of alienating their bosses.) Advertising revenue rose 34% to $269 million and the broadband outfit also approved a 20% dividend increase, to $0.48 per share. Meanwhile ARPU (Average Revenue Per User) was up 10% on an annual basis to $128.17, which is no surprise to those of us who subscribe to the company's service; evidence of inflation has, after all, long been apparent to anyone who ever opened up a cable bill.

The firm officially separated from its corporate parent on March 12, 2009. Since this was the same week stocks tumbled to a 12-year low the timing wasn't especially auspicious, but its shares have since rebounded to return investors some 60% in the past year. Regulation remains an industry risk, and Time Warner Cable is relatively weak in wireless, but it should still be able to pay the rent. No mean feat given its $1.8 billion Columbus Circle corporate headquarters is the priciest property in US history.

Turn to Time Warner Abandons Plan to Gouge You – For Now, Disney Plays Dirty in Cablevision Spat, and CBS Series Disappearing from DVR Menus for more.

Goldman Sachs, whose former president knew a thing or two about office furniture, has helped send stock in Ethan Allen Interiors (ETH) sharply lower this afternoon. Its analyst downgraded shares of the home furnishings and fixtures firm founded in the frugal make-do-and-mend depths of the Depression.

Ethan offers assorted armoires, tables, chairs, and the like at about 300 either company-operated or independently owned design centers. This quintessentially Connecticut company, named after an American Revolutionary War hero, actually has as its unlikely head a 66-year-old Pakistani named Farooq Kathwari whose son was killed while fighting for the Mujahideen in Afghanistan. When not trying to bring peace to Kashmir in his spare time, Kathwari has done a more than a decent job at the helm. The firm reported strong quarterly results on Tuesday, sending its shares up 11%. Even with today's rating cut Goldman took its price target up to $19 from $15, an unusual move when a stock is simultaneous being slashed to Sell from Neutral.

The bank does however ancipiate that revenue growth will level off as comparisons become progressively more challenging. With new-home sales, admittedly a much smaller slice of the real estate market than existing ones, having fallen to a 47-year low only yesterday, customers are hardly flush with redecorating funds at present.

Read related content at Local Furniture Store Commercial Explains Federal Reserve Monetary Policy, Don't Hang Your Hat on Pier 1, and Should We Follow John Paulson Back Into the Housing Market?

While nine out of 10 economists now agree there is greater optimism over the US recovery, the lone holdout clearly remains adamant in their refusal to brush with Colgate-Palmolive (CL). Perhaps concerns over fluoride have finally finished off the fine work begun by Jessica Simpson in assuring the dental industry of a fabulous future. Whatever the reason, both Colgate and its Crest competitor Procter & Gamble (PG) ended down today after earnings.

Colgate, whose other well-known brands include Ajax, Irish Spring, Softsoap, Speed Stick, and the Science Diet line of pet nutrition products, reported a 1% decline in fourth-quarter net income, while a currency hit contributed to a 3% reduction in revenue, to $3.98 billion. The Park Avenue personal products powerhouse established in 1806 also saw gross margins fall by 40 basis points to 59.1% on increased input costs, a common refrain across a range of industries of late. Its Latin America segment showed itself especially vulnerable to competitive pressure, and absent the benefit of a lower effective tax rate results would have been even worse.

Granted, Colgate said its worldwide market share in toothpaste and toothbrushes reached recored levels last year, with respective increases to 44.2% and 31.6%. Still it will take more than that -- or a 2.74% dividend yield -- to turn frowns upside down at a firm whose shares have now been underwater for a full year.

Four Losers in the Brand Wars, What a Long, Strange Trip it's Been for Saccharin, and Urban Legends: Altoids as Minty Sex Aid have additional insight.

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No positions in stocks mentioned.
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