Netflix (NFLX) Stock Slipped, Rival Hulu Seeks to Sell Stake to Time Warner.

Netflix (NFLX) shares are tumbling as rival Hulu is reportedly looking to sell a stake to Time Warner (TWX), heating up competition in the video streaming industry.
By U-Jin Lee ,

NEW YORK (TheStreet) -- Netflix (NFLX) - Get Report  shares tumbled 3.49% to $108.92 on Thursday as rival Hulu is reportedly looking to sell a stake to Time Warner (TWX), a deal that could heat up competition in the video streaming industry, the Wall Street Journal reports.

The deal would value Hulu at more than $5 billion, putting it in a better position to compete not only with Netflix but Amazon.com (AMZN), the Journal noted.

In addition, Hulu could gain an advantage from the deal as it would broaden its content offerings. 

There are also current discussions about how Time Warner would invest cash in Hulu and commit to license content to the streaming service. For Hulu, bringing Time Warner on board is a "long-term strategy," the Journal added.

Based in Los Gatos, CA, Netflix engages in the Internet delivery of TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally.

Separately, 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 solid stock price performance, robust revenue growth and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, NFLX's share price has jumped by 108.87%, exceeding the performance of the broader market during that same time frame. Although NFLX had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • NFLX's revenue growth trails the industry average of 45.5%. Since the same quarter one year prior, revenues rose by 23.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. 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.
  • Net operating cash flow has significantly decreased to -$195.97 million or 423.43% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: NFLX
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