NEW YORK (TheStreet) -- Netflix (NFLX - Get Report) is in negotiations with U.S. cable providers such as Comcast (CMCSA - Get Report) and Time Warner (TWC - Get Report) to integrate its streaming video service into their set-top boxes, according to The Wall Street Journal.
While Netflix already has two similar deals in Europe, this would mark the first with major U.S. cable companies, a relationship formerly seen as contentious.
Speaking at a Goldman Sachs conference in September, CFO David Wells commented on Netflix's willingness to explore partnerships with cable companies.
"We would love to reduce the friction to the end consumer and to be available via the existing device in the home which is the set-top box," he said.
Netflix shares are trading 4.8% higher to $315.33 as of 11:12 a.m. New York time. The company will report third-quarter earnings after the bell on October 21.
Time Warner Cable has declined to comment on the reports. At time of publication, neither Netflix nor Comcast had responded to requests for comment.
TheStreet Ratings team rates Netflix Inc as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate Netflix Inc (NFLX) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, premium valuation and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NFLX's revenue growth has slightly outpaced the industry average of 17.8%. Since the same quarter one year prior, revenues rose by 20.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for Netflix Inc is currently very high, coming in at 80.03%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 2.75% is above that of the industry average.
- 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 29 cents a share vs. $4.17 a share in the prior year. This year, the market expects an improvement in earnings ($1.46 vs. 29 cents).
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Internet & Catalog Retail industry and the overall market, Netflix Inc's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: NFLX Ratings Report
Written by Keris Alison Lahiff.