Netflix CEO on Stock Rally: 'Euphoria Today Feels Like 2003′

Netflix Inc.(NFLX) is the king of the S&P 500 this year, a feat that hasn’t gone unnoticed by CEO Reed Hastings.

“In calendar year 2003 we were the highest performing stock on Nasdaq,” Mr. Reed wrote in a quarterly letter to investors. “We had solid results compounded by momentum-investor-fueled euphoria.”

“Some of the euphoria today feels like 2003.”

Netflix shares surged 10% to $391.55 in after-hours trading following the Internet-streaming company’s upbeat quarterly figures and strong subscriber growth. The stock is up 283% this year through Monday’s close, the top performer in the S&P 500.

Netflix has been one of the market’s biggest momentum plays of the year. This group of go-go stocks, which includes Google Inc. shares surging above $1,000 and Facebook Inc.(FB) rallying more than 100% this year, has fueled comparisons to the dot-com bubble when tech stocks soared to historically high levels.

Netflix trades at 226 times projected earnings over the next 12 months, FactSet data show. By comparison, Apple and Microsoft each trade at about 13 times forward earnings. Yahoo(YHOO) has a price-to-earnings multiple of 22 and Facebook trades at 74 times projected earnings.

The S&P 500 is trading at about 14.5 times the next 12 months' worth of earnings.

“Just because we are not at bubble valuations, it does not mean this is not a bubble-like environment,” Michael O'Rourke, chief market strategist at JonesTrading Institutional Services, wrote to clients over the weekend.

The difference now, analysts say, is many of the companies that have rallied recently are profitable and have more sound business models compared to the companies of the late 1990s.

Mr. Hastings pointed to Netflix’s progress in the section of his quarterly letter headlined “stock volatility.”

“Despite the huge swings in our stock price since our 2002 IPO ($8 to $3 to $39 to $8 to $300 to $55 to $330), we've continued to grow our membership every year fairly steadily,” he says. “We do our best to ignore the volatility in our stock.

“The progress we've made over the last 10 years is stunning,” Mr. Hastings added. “We want to make the next 10 years even more remarkable.”

Mr. Hastings calls Netflix’s progress “stunning.” Does that justify a 283% rally this year in the stock price? You tell us. Drop your thoughts and views in the comments’ section below. We’d love to hear the sentiment surrounding this stock.