Why Netflix (NFLX) Is Down Today

NEW YORK (TheStreet) -- Shares of Netflix (NFLX) were down as high beta names on the Nasdaq continued to take a pounding Monday. Tesla (TSLA), Twitter (TWTR), eBay (EBAY) and Facebook  (FB) were all hit hard in early trading Monday. The Nasdaq is down 1.7%.

Netflix shares were down 8.6% to $371.20 in mid-Monday trade.

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Activist investor Carl Icahn went on television and noted he had sold about half his shares in the video streaming company. In an interview with CNBC, Icahn stated, "We still have a position. But I did sell a fair percentage of our holdings. I think Netflix is a great company. They got a great model. When we bought it, it was $58. It's not $58 anymore. I don't have it in front of me. I think I sold half. And I think it's a great company, and we've got a great CEO there in Reed Hastings. But hey, all these companies, you don't go to the sky."

Icahn cited Federal Reserve intervention in what he deemed an "artificial market" for his lack of temerity in the stock. "One of our problems is the Federal Reserve. This is kind of an artificial market, isn't it? I mean, you have the Fed pumping and pumping the money in. I don't see the great earnings we should be having. How much can Janet Yellen keep doing?"

Net nuetrality concerns may also be hurting Netflix today. In a note published last week Hastings wrote that "The essence of net neutrality is that ISPs such as AT&T  (T) and Comcast  (CMCSA) don't restrict, influence or otherwise meddle with the choices consumers make. The traditional form of net neutrality which was recently overturned by a Verizon lawsuit is important, but insufficient."

Netflix -- which recently signed a deal with Comcast that would allow the streaming service unimpeded access to the cable and internet provider's network-- says that it is weary of signing similar deals with other service providers in the future. "Without strong net neutrality, big ISPs can demand potentially escalating fees for the interconnection required to deliver high quality service. The big ISPs can make these demands -- driving up costs and prices for everyone else -- because of their market position."

The Wall Street Journal is reporting that Apple  (AAPL) and Comcast are working on a similar deal for Apple's nascent Apple TV streaming service. Details of the arrangement have not been finalized or announced but a potential deal would add direct competition to Netflix services.

TheStreet Ratings team rates NETFLIX INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate NETFLIX INC (NFLX) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • The revenue growth came in higher than the industry average of 8.6%. Since the same quarter one year prior, revenues rose by 24.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 507.69% and other important driving factors, this stock has surged by 131.77% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • NETFLIX INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, NETFLIX INC increased its bottom line by earning $1.85 versus $0.29 in the prior year. This year, the market expects an improvement in earnings ($4.04 versus $1.85).
  • 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 513.1% when compared to the same quarter one year prior, rising from $7.90 million to $48.42 million.
  • The gross profit margin for NETFLIX INC is currently very high, coming in at 82.25%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.12% is above that of the industry average.
  • You can view the full analysis from the report here: NFLX Ratings Report
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