SAN FRANCISCO (Dow Jones) - Online DVD rental pioneer Netflix Inc. said Thursday that it expects to have 5 million subscribers in 2006, one year earlier than the company had predicted.

Netflix (NFLX) said it has also set a new goal of reaching 20 million subscribers in five to seven years.

Shares of Netflix climbed $1.50, or nearly 7%, to close at $24.09 following the company's announcement, which came out shortly before the stock market closed.

"Our outlook for the future reflects the continuing rapid subscriber growth and the increasing impact of the cost advantages and other financial benefits that flow from our market leadership," said Reed Hastings, co-founder and chief executive, in a written statement.

Netflix also said its results for the rest of the year appear on track to match forecasts it made in July.

Third-quarter revenue will be $172.5 million to $176.5 million, with subscribers of 3.35 million to 3.5 million.

In the fourth quarter, Los Gatos, Calif.-based Netflix still expects revenue of $187 million to $193 million, and 3.85 million to 4.05 million subscribers.

For a basic subscription price of $17.99, consumers can hold onto as many as three DVDs at any one time. The company has a library that includes more than 50,000 titles.

In the second quarter, the company reported a 53% spike in subscribers compared to the same period a year earlier, largely helped by its $9.99 per- month plan that lets users take out one disc at a time. Netflix said it also benefited from increasing overall demand for DVDs, in contrast to widespread concerns about slowing demand.

Subscriber-acquisition cost, a key metric for critics of Netflix who have worried about the company's spending habits, was $37.25 per gross subscriber addition, compared with $35.12 for the year-ago quarter and $37.89 in the first quarter of this year.

Some analysts had expected a figure in the range of $40 per subscriber.

"We spent less in online and TV [advertising] than we expected to," Barry McCarthy, Netflix's chief financial officer, said during the company's quarterly conference call. "We were too conservative in our assumptions about what things were going to cost, and the yield from various initiatives. So ... given our strong performance in Q2, we should have spent more on marketing and grown even faster."

(END) Dow Jones Newswires

09-08-05 1725ET Copyright (c) 2005 Dow Jones & Company, Inc. Copyright (C) 2005 Dow Jones & Company, Inc. All Rights Reserved.