NEW YORK (TheStreet) -- Netflix (NFLX) shares are down 1.45% to $345.82 in early market trading on Monday after the media streaming service had coverage initiated with a "neutral" rating by analysts at UBS on Monday.
Netflix stock has declined 5.6% so far this year with the company reporting domestic streaming subscriber growth of less than 1 million new users, falling short of its own guidance of 1.33 million new users, during the third quarter financial period.
Separately, the company will also reportedly have new competition in Australia when it launches its service there next year. Broadcast network Seven and pay television giant Foxtel announced plans for a streaming service to rival Netflix.
The companies did not announce a launch date for the Netflix rival while the U.S. based Netflix is set to make its Australian debut in March.
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 robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, weak operating cash flow and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 13.0%. Since the same quarter one year prior, revenues rose by 27.4%. 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. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. 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 ($3.41 versus $1.85).
- The gross profit margin for NETFLIX INC is currently very high, coming in at 83.28%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 4.20% trails the industry average.
- In its most recent trading session, NFLX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- Net operating cash flow has significantly decreased to -$37.44 million or 207.91% 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