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Netflix (NFLX): Has The Stock Peaked?

Carla Olson | 11:56 am ET, 11 Apr 2018

The Netflix stock (NASDAQ: NFLX) spiked around 4% today in mid-day trading. The stock witnessed a 60% year-to-date spike (visit Finstead and type “NFLX YTD return” to get the latest return).

What should you know about this stock?

The company’s exciting original content makes the stock more attractive.   Since Netflix is capable of delivering outstanding services in the competitive market, investors are getting more optimistic about sustaining growth.

Its resilience and the lack of dependency on trade agreements have made the stock even more appealing to investors.  Despite the prospect of a trade war between the US and China, the stock has remained unaffected.

Netflix outperformed its rivals such as Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL) and Apple (NASDAQ: AAPL).

The growth is evident from the rising number of subscribers throughout the world. It is a cheaper substitute for TV.  Netflix consistently recorded a 6% average growth rate after hitting more than 100 Million paid subscribers in the second quarter of last year.

The Netflix stock surpassed previous quarter's EPS with a remarkable 650%  margin growth. The company recorded a 320% average year-over-year EPS growth since the fourth quarter of 2016, which is a sharp contrast to -15% margin decline from the third quarter of 2016. The margin expansion is a clear indication that the investment in expanding subscriber volume is paying off.

Can the stock sustain the momentum? Per Finstead Research, Netflix has the average price target of $266.

Netflix has a fairly high valuation compared to its peers. Its P/E ratio lags only that of AMZN.

The high Short Share of Float indicates potential volatility in the upcoming days.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for AskFinny Bites, please send us an email at hi@askfinny.com.

FAANG Pullback Inevitable in 2018?

Carla Olson | 7:09 am ET, 02 Jan 2018


As you're entering 2018, you may be wondering which stocks that you own in your portfolio are bound for a 'correction' in 2018.  

The scale of the FAANG rally in 2017  has led some investors to believe that this group has been overdone as an investing theme, especially given signs of overvaluation. 

Facebook, Amazon, and Netflix were up more than 50% over the last 12 months; Apple's gain was over 50%, and Google 'trailed behind' with 30%+ annual stock price growth.

And the FAANG stocks weren’t just market leaders this year; they accounted for a sizable portion of Wall Street’s overall move higher. 

How do the analysts feel about these stocks?  Morgan Stanley said it is still positive on the group, but macro factors could be concerning.  History indicates that returns may moderate their pace and Morgan Stanley analysts question whether growth can be sustained in the upcoming period.  

Apple investors should be especially worried about the $1,000 price tag on the iPhone X that may cut into first-quarter demand.

The group may be less well-insulated from cyclical pressures that many investors anticipate will increase over the next couple of years.  These stocks are tied to the cycle via advertising and consumer spending.

Here is a look-back on Facebook and Amazon stock performance.  Over the last year, FB returned +52.54%. This return is higher than Internet Information Providers sector (42.56%), Technology industry (26.77%), S&P 500 (18.87%) returns.

Over the last year, AMZN returned +52.98%. This return is higher than Catalog & Mail Order Houses sector (20.39%), Services industry (4.74%), S&P 500 (18.87%) returns.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for AskFinny Bites, please send us an email at hi@askfinny.com.

Netflix, Inc. (NFLX) Buy or Sell Stock Guide

Updated at: 11:13 am ET, 12 Oct 2019

Are you looking for the analysis of Netflix, Inc. (NFLX) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 9 reasons to buy and 11 reasons to sell NFLX stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about NFLX stock:

  • Is NFLX a buy or a sell?
  • Should I sell or hold NFLX stock today?
  • Is NFLX a good buy / investment?
  • What are NFLX analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy NFLX stock:

1. Netflix's internal recommendation software and large subscriber base give the company an edge when deciding which content to acquire in future years.

2. TV Everywhere from traditional pay-TV distributors has been slow to roll out and largely replicates the linear experience, gifting Netflix with an extended window to remain the leading provider of Internet television in the U.S.

3. Looking at Netflix’s strong history of year-over-year revenue and earnings growth, we believe that its strategic initiatives such as international expansion and focus on original content should help sustain the momentum ahead.

4. Netflix is now focusing on producing more quality original content than ever to increase as well as broadly diversify its subscriber base. To establish itself as a leading content provider, the company is taking a number of initiatives, including the development of more kids- and family-oriented content. The CFO David Wells commented that the company plans to make 50% of its total content original over the next few years.

5. Netflix’s applications for both Android and Apple devices have helped it expand its market share. Netflix subscribers can stream any movie or show of their choice through these devices. Comcast has made the Netflix app available on its X1 platform, featuring voice controls and search results, among other things.

6. NFLX quarterly revenue growth was 26.00%, higher than the industry and sector average revenue growth (1.75% and 2.78%, respectively). See NFLX revenue growth chart.

7. NFLX profitability is improving. The YoY profit margin change was 2.67 percentage points. See NFLX profitability chart.

8. NFLX average analyst rating is Buy. See NFLX analyst rating chart.

9. NFLX average analyst price target ($390.97) is above its current price ($282.93). See NFLX price target chart.

Now that you understand the bull case, let’s look at the reasons to sell NFLX stock (i.e., the bear case):

1. The expansion into international markets is unprofitable today, and any material level of profitability may take five years or longer to achieve.

2. The election of Donald Trump may change the FCC's willingness to implement strict net neutrality rules in the U.S., thus allowing broadband providers to charge Netflix for access.

3. Netflix may be overpaying for content due to the presence of Amazon and Hulu. The entry of new competitors may exacerbate the rising cost of content.

4. Netflix primarily faces competition from bellwethers like Amazon Prime Instant Video, Hulu and Time Warner’s HBO, which also offer online streaming services. Given the scope for growth in the market, all the players are ramping up their efforts to boost their subscriber base. Amazon is also undertaking a number of initiatives to enhance its content portfolio and even venturing into original programming, which might pose some challenges for Netflix.

5. International expansion and content additions resulted in cost escalations in the form of technology investments and marketing expenses. However, the recent expansions will further dent the company’s profitability in the near term. Moreover, it is also expecting a significant amount of debt, which should add to interest expense.

6. Cash flow burn is here to stay. The company said it expects free cash flow to be negative for years to come as it diverts more capital into producing content.

7. NFLX forward P/E ratio is 46.37, and it’s high compared to its industry peers’ P/E ratios. See NFLX forward P/E ratio chart.

8. NFLX Price/Book ratio is 18.82, and it’s high compared to its industry peers’ P/B ratios. See NFLX forward Price/Book ratio chart.

9. NFLX Price/Sales ratio is 6.52, and it’s high compared to its industry peers’ P/S ratios. See NFLX forward Price/Sales ratio chart.

10. NFLX PEG ratio (P/E adjusted for growth) is 1.75, and it’s high compared to its industry peers’ PEG ratios. See NFLX PEG chart.

11. NFLX short share of float is 5.02%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock. See NFLX short share of float chart.

Now let's look at the key statistics for NFLX:

Metrics NFLX
Price $275.25
Average Price Target / Upside $390.97 / 42.04%
Average Analyst Rating Buy
Industry Media - Diversified
Sector Consumer Cyclical
Number of Employees 7,100
Market Cap $125.02B
Forward P/E Ratio 50.45
Price/Book Ratio 7.09
PEG 1.88
Revenue (TTM) $17.63B
YoY Quarterly Revenue Growth 26%
Profit Margin 6.53%

What are your thoughts on NFLX?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for AskFinny Bites, please send us an email at hi@askfinny.com.

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