NEW YORK (TheStreet) -- Netflix (NFLX) - Get Report is splitting its stock 7-for-1. Apple (AAPL) - Get Reportsplit its stock a year ago, and has been up more than 35% since the split. This doesn't mean you should buy.
Here is what TheStreet's Jim Cramer says about Netflix's stock split:
"Netflix, is it a 'buy' after the stock split? First, you know that stock splits are cosmetic; they don't create any value. But Netflix is a stock individuals want to own, and they feel that they can't own a lot of it when it's at $700, so I imagine they'll be some buy. Now be careful here, when Apple split, do you know that stock went down, when you actually got the stock that day, for the next five days. So, don't get too excited. I understand that the stock is flying. You want to own Netflix because the opportunity is great, not because of the split."
Exclusive Look Inside:
You see Jim Cramer on TV. Now, see where he invests his money and why. Learn more now.
And TheStreet Ratings,TheStreet's proprietary ratings tool agrees with him, rating Netflix a "hold."
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
When you're done, be sure to read about which volatile aerospace and defense stocks to buy now. Year-to-date returns are based on June 23, 2015, closing prices. The highest-rated stock appears last.
Netflix, Inc., an Internet television network, engages in the Internet delivery of TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally. The company operates in three segments: Domestic Streaming, International Streaming, and Domestic DVD.
"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 robust revenue growth, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and premium valuation."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NFLX's revenue growth has slightly outpaced the industry average of 18.8%. Since the same quarter one year prior, revenues rose by 23.9%. 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.
- The gross profit margin for NETFLIX INC is currently very high, coming in at 83.44%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 1.50% is above that of the industry average.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market on the basis of return on equity, NETFLIX INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
- Net operating cash flow has significantly decreased to -$127.38 million or 450.34% 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 Ratings Report