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Trade-Ideas: Netflix (NFLX) Is Today's Weak On High Relative Volume Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Netflix (NFLX) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Netflix as such a stock due to the following factors:

  • NFLX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $970.5 million.
  • NFLX has traded 5.8 million shares today.
  • NFLX is trading at 4.56 times the normal volume for the stock at this time of day.
  • NFLX is trading at a new low 5.02% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in NFLX with the Ticky from Trade-Ideas. See the FREE profile for NFLX NOW at Trade-Ideas

More details on NFLX:

Netflix, Inc. provides Internet television network service that enables subscribers to stream TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally. NFLX has a PE ratio of 629.9. Currently there are 6 analysts that rate Netflix a buy, 4 analysts rate it a sell, and 16 rate it a hold.

The average volume for Netflix has been 3.6 million shares per day over the past 30 days. Netflix has a market cap of $14.9 billion and is part of the services sector and specialty retail industry. The stock has a beta of 1.50 and a short float of 16.9% with 1.85 days to cover. Shares are up 185.8% year to date as of the close of trading on Monday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Netflix as a hold. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, premium valuation and weak operating cash flow.

Highlights from the ratings report include:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet & Catalog Retail industry. The net income increased by 158.7% when compared to the same quarter one year prior, rising from -$4.58 million to $2.69 million.
  • NFLX's revenue growth trails the industry average of 36.7%. Since the same quarter one year prior, revenues rose by 17.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • NETFLIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NETFLIX INC reported lower earnings of $0.29 versus $4.17 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $0.29).
  • Net operating cash flow has significantly decreased to -$12.17 million or 163.66% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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