Netflix (NFLX) Showing Signs Of Being A Momo Momentum Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Netflix ( NFLX) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Netflix as such a stock due to the following factors:

  • NFLX has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $923.6 million.
  • NFLX has a PE ratio of 144.9.
  • NFLX is currently in the upper 30% of its 1-year range.
  • NFLX is in the upper 25% of its 20-day range.
  • NFLX is in the upper 35% of its 5-day range.
  • NFLX is currently trading above yesterday's high.
  • NFLX has experienced a gap between today's open and yesterday's close of 2.5%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

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More details on NFLX:

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. NFLX has a PE ratio of 144.9. Currently there are 18 analysts that rate Netflix a buy, 2 analysts rate it a sell, and 9 rate it a hold.

The average volume for Netflix has been 2.4 million shares per day over the past 30 days. Netflix has a market cap of $33.7 billion and is part of the services sector and media industry. The stock has a beta of 1.73 and a short float of 8.7% with 3.29 days to cover. Shares are up 63.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Netflix as a hold. 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 ratings report include:

  • NFLX's revenue growth has slightly outpaced the industry average of 19.8%. 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. Regardless of the strong results of the gross profit margin, the net profit margin of 1.50% trails 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.

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