Has Netflix Peaked...? Or Trading at Value Levels?
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Netflix (Nasdaq: NFLX) shares are continuing lower Friday following a 6.4 percent slide Thursday. Notably, this will be the fourth session in a row Netflix closed lower.
If the stock ends in the red Monday, it would be the first five-day slide since late February, nearly 6 months. Let's remember the S&P 500 was down over 9 straight trading sessions at the end of July/beginning of August.
The stock didn't budge too much when Amazon.com (Nasdaq: AMZN) announced an expansion of its offerings to 100,000 (though only 9000 are Netflix-quality streams and programs). Shares reacted more to the overall market sell off, and Amazon still has a long way to go and a lot of money to spend before its in Netflix's neighborhood.
But after getting to a high of $304.79, has Netflix topped out? Shares have closed lower in 17 of 28 trading sessions, unmatched since February.
Strengthening a bull case, however, reports Wednesday suggested Netflix is targeting a launch in Spain in early 2012, and certain Asian markets later in the year.
It's hard to value Netflix, virtually a pioneer in the business. At about 30x forward earnings, shares are cheaper than the 44x they traded for at the peak in July, and could probably be a good buy. Further, earnings have been going up constantly over the last four quarters, beating estimates by an average of 11 percent over the period according to data from Earnings Insider. One area of concern might be free cash flow, which was down 25 percent last quarter from the preceding quarter, but up 74 percent year over year to $59.55 million. Looking at the first six months of 2010 and 2011, and free cash nearly doubled to $138.85 million.
Operating expenses, as a percentage of overall revenue, dropped 150 basis points sequentially, and 120 basis points from the same period of last year.
With expansion plans in place, constant earnings, and favorable technicals, this might be a cheap buy for the long-term investor. Just do some homework before jumping in!
If the stock ends in the red Monday, it would be the first five-day slide since late February, nearly 6 months. Let's remember the S&P 500 was down over 9 straight trading sessions at the end of July/beginning of August.
The stock didn't budge too much when Amazon.com (Nasdaq: AMZN) announced an expansion of its offerings to 100,000 (though only 9000 are Netflix-quality streams and programs). Shares reacted more to the overall market sell off, and Amazon still has a long way to go and a lot of money to spend before its in Netflix's neighborhood.
But after getting to a high of $304.79, has Netflix topped out? Shares have closed lower in 17 of 28 trading sessions, unmatched since February.
Strengthening a bull case, however, reports Wednesday suggested Netflix is targeting a launch in Spain in early 2012, and certain Asian markets later in the year.
It's hard to value Netflix, virtually a pioneer in the business. At about 30x forward earnings, shares are cheaper than the 44x they traded for at the peak in July, and could probably be a good buy. Further, earnings have been going up constantly over the last four quarters, beating estimates by an average of 11 percent over the period according to data from Earnings Insider. One area of concern might be free cash flow, which was down 25 percent last quarter from the preceding quarter, but up 74 percent year over year to $59.55 million. Looking at the first six months of 2010 and 2011, and free cash nearly doubled to $138.85 million.
Operating expenses, as a percentage of overall revenue, dropped 150 basis points sequentially, and 120 basis points from the same period of last year.
With expansion plans in place, constant earnings, and favorable technicals, this might be a cheap buy for the long-term investor. Just do some homework before jumping in!
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