Netflix (NFLX) shares surged higher in pre-market trading after billionaire investors Bill Ackman revealed a new $1 billion stake in the streaming group following the slump from its fourth quarter earnings last week.
Ackman said Pershing Square Capital Management began buying shares in Netflix late last week, when they first slipped below $400 following its weaker-than-expected fourth quarter earnings report, and has now amassed a holding of around 3.1 million shares.
Netflix, in fact, lost $50 billion in market value during that Friday trading session after it told investors that first quarter subscriber growth would slow to 2.5 million, compared to a market forecast of 5.9 million, citing what it called "Covid overhang" in key overseas markets.
"We are pleased to add Netflix to our portfolio," Ackman told investors in his hedge fund late Wednesday. "Many of our best investments have emerged when other investors whose time horizons are short term, discard great companies at prices that look extraordinarily attractive when one has a long-term horizon."
"We have greatly admired Netflix both as consumers and as investors, but have never previously owned a stake in the company," Ackman said. "Netflix is a primary beneficiary of the growth in streaming and the decline in linear TV driven by its superior customer experience, a vast and diverse amount of superb, constantly refreshed content, global improvements in bandwidth, and the proliferation and continuous improvement and convenience of devices on which one can watch."
Netflix shares were marked 5.6% higher in early trading Thursday to change hands at $379.80 each.
Netflix said last week that earnings for the three months ending in December were pegged at $1.15 per share, down 3.3% from the same period last year but firmly ahead of the Street consensus forecast of 82 cents per share, while revenues rose 16% to $7.71 billion.
In terms of revenues, Netflix said it sees a top line of $7.9 billion for the current quarter, with net income in the region of $1.304 billion, translating into earnings of $2.86 per share.
