Netflix's 180: From running out of excuses to running full-tilt

When the main character in Netflix's "Orange Is the New Black" leaves her comfortable Brooklyn life for a year in prison, her reassuring mantra is "It's only year." How much can change in a year?

In the case of Netflix itself, a lot. Luckily for the online streaming video company, the changes -- unlike those in store for the protagonist of its original series -- are all pretty good. With the elation driving his company's stock sky-high, in the span of a year Chief Executive Reed Hastings has gone from being sick of making excuses to being sick of the all the fuss.

Netflix on Mondayreported that its third-quarter profit surged again, as it added more domestic subscribers -- and still more customers internationally. Its outlook for profit in the coming quarter topped out higher than even most bullish Wall Street analysts had expected. The company kicked off its letter to shareholders saying how "very pleased" it is "to have over 40 million members, up from less than 30 million just one year ago."

The streaming-video provider took the opportunity to gloat a little about its warm reception in the Netherlands, the 41st country it has entered, as well as how "Orange Is the New Black" is a critical and popular hit and how "House of Cards" won the first Primetime Emmy Award for an Internet TV series. The company's content chief, Ted Sarandos, said the Emmy nominations produced a unique bump in audience for "House of Cards" even months after its debut.

That's a far cry from a year ago, when Chief Executive Reed Hastings said he was tired of making excuses for Netflix failing to live up to the company's past achievements -- and the expectations its investors held based on that earlier performance.

Since going public in 2002, Netflix enjoyed a steady stream of shining quarterly performances until the summer of 2011. That was when it made the ill-fated decision to double prices for some customers while attempting to spin off its DVD-by-mail arm. The backlash was immediately and overwhelmingly negative; the repercussions included 800,000 lost subscribers in the third quarter of that year and a precipitous drop in stock price.

As Netflix worked to find its footing following the debacle, quarter after quarter disappointed investors and management. A year ago, Hastings fielded an analyst's question about how the 2012 Olympic games in London might be draining watchers from Netflix and depressing subscriber additions. Hastings discarded the opportunity to pass the blame.

"You're very gracious, because I imagine what you really feel is: 'Why do we make seasonality excuses and then Olympics excuses?' And aren't you getting tired of hearing it?'" Hastings told the analyst on the call in 2012. "We are tired of making those excuses, as opposed to getting back to our track record."

On Monday, Hastings found himself pointing to seasonality and other one-off factors, only now in the form of a plea for rationality.

BTIG Research analyst Rich Greenfield asked Hastings yesterday why he expected US streaming subscriber gains to be about the same in the current quarter as they were the year earlier, even though net additions have been greater year over year for the past three periods.

His response: Those three periods were flukes. In the first quarter, "we were ahead of a year ago because of our subscriber redefinition," he said. The second quarter saw the launch of "Arrested Development," the only franchise in its originals pipeline with a built-in demand at the outset, and the latest period benefited from the soft comparison to that weak Netflix summer of rapid Olympics watching, Hastings told him.

Rather than predict a fourth quarter with higher net additions, "that's why we'll be quite pleased with a steady year-over-year for Q4, and that's the underlying belief system," Hastings said.

With subscribers joining again at a brisk clip and the stock at all-time highs, Hastings is wishing more investors would take a sober look at the full track record. "Every time I read a story about Netflix as the highest appreciating stock in the S&P 500, it worries me because that was the exact headline that we used to see in 2003," Hastings said on the conference call Monday evening to discuss third-quarter results. "A sense of momentum investors driving the stock price more than we might normally. There's not a lot we can do about it but I wanted to honestly reflect upon that."

Some analysts echoed a sense of helplessness at Netflix's runaway performance in the market. Evercore analyst Alan Gould said that while he is "loath" to raise his rating on the company while it continues to be one of the most expensive out there, his presumption now is that "it is as likely that the stock can continue increasing as decreasing despite its lofty valuation." Michael Pachter, a Wedbush analyst who has long recommended against holding Netflix, said he was "grudgingly" raising his target price for the stock, which is still less than half the shares' value.

Their attempts at temperance are falling on deaf ears. After Netflix's earnings report Monday night, shares are on track to open more than 9 percent higher than their level before the results.

It would mark -- again -- their highest level ever.