Shares of entertainment service provider Netflix (NFLX) have fallen since the company reported weak results in the first quarter. But can they regain the company’s ability to leverage its broad portfolio of products and services? Keep reading to know our vision.
Netflix Inc. (NFLX) in Los Gatos, California, offers television series, documentaries, feature films, and mobile games in a variety of genres and languages. He recently announced that he had signed a combined agreement to acquire Next Games to expand its in-house gaming studio capabilities. However, the company achieved disappointing results, losing 200,000 customers in the first quarter and projecting that its subscribers will shrink by 2 million more customers in the second quarter.
The stock price has fallen 43.9% in the last month and 68.8% in the last six months to close yesterday’s trading session at $ 209.91. In addition, it is currently trading at 70.1% below its 52-week high of $ 700.99, which reached November 17, 2021.
In addition, fierce competition, the impact of the distribution of accounts, rising inflation and the war between Russia and Ukraine make the company’s short-term outlook uncertain.
Here’s what could affect NFLX performance in the coming months:
Top-line growth does not translate into bottom-line improvement
During the first fiscal quarter ended March 31, 2022, NFLX revenue increased 9.8% year-over-year to $ 7.70 billion. The company’s operating income rose 0.6% year-over-year to $ 1.70 billion. However, its net income amounted to $ 1.6 billion, a decrease of 6.4% year-on-year. In addition, its EPS was $ 3.53, down 5.9% year-on-year.
In terms of 12-month CAPEX / sales, 1.86% of NFLX is 56.3% lower than the industry average of 4.25%. In addition, its gross profit margin for the next 12 months of 41.62% is 18.1% lower than the industry average of 50.83%.
In terms of P / CF onwards, NFLX’s 84.48x is 758.9% higher than the industry average of 9.84x. And its advanced P / B of 4.70 times is 109.7% higher than the industry average of 2.24 times. In addition, the anticipated P / S of shares and EV / EBITDA of 2.88x and 14.97x, respectively, are higher than the sector averages of 1.51x and 8.61x.
POWR ratings do not indicate enough advantages
NFLX has an overall C rating, which is equivalent to a neutral in ours POWR ratings system. POWR scores are calculated taking into account 118 different factors, with each factor weighted to an optimal degree.
Our own rating system also evaluates each value based on eight different categories. NFLX has a C rating for value, which is in sync with its industry-leading valuation ratios.
In addition, NFLX has a Grade C for Growth and Feeling. This is justified by the fact that analysts expect their EPS to fall by 12.2% next quarter and 3.1% this year.
NFLX ranks 20th out of 72 shares in the F rankings Internet industry. Click here to access the NFLX’s momentum, quality, and stability ratings.
NFLX is currently trading below its 50- and 200-day moving averages of $ 357.98 and $ 519.41, respectively, indicating a downward trend. In addition, it could continue to decline in the short term due to concerns about sharing multifamily accounts and increasing competition. Therefore, the stock seems overvalued at its current price level, and we think it might be wise to wait for a better entry point to the stock.
How does Netflix Inc. compare? (NFLX) with your teammates?
Although NFLX has an overall POWR rating of C, you may want to consider investing in the following Internet stocks with an A (Strong Buy) or B (Buy) rating: trivago NV (TRVG), Yelp Inc. (YLP), and Travelzoo (TZOO).
Keep in mind that TRVG is one of the few stocks hand-selected by our chief growth strategist, Jaimini Desai, currently in the POWR stock portfolio below $ 10. More information here.
Shares of NFLX were trading at $ 199.95 per share on Tuesday afternoon, down $ 9.96 (-4.74%). To date, NFLX has decreased -66.81%, compared to a -11.80% increase in the S&P 500 benchmark index over the same period.
About the author: Nimesh Jaiswal
Nimesh Jaiswal’s His keen interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in boosting stock prices is the key approach he takes while advising investors on his articles.
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