Netflix Climbs Even Higher on Expectations of Stock Split

New York (TheStreet) -- Netflix (NFLX) was moving ever higher on Wednesday as investors anticipate the world's largest streaming service will execute a stock split after shareholders approved the measure at the company's annual meeting yesterday.

Los Gatos, Calif.-based Netflix was climbing 2.9% to $666.03, extending its 2015 advance to 92%. Shares have jumped 14% over the past month. 

By splitting its stock, the subscription video-streaming service said it could become  more "accessible" to investors, according its first quarter letter. Many retail investors are put off by Netflix shares at it current price level. A lower price is likely to attract a wider pool of investors.

Regardless of the real price of Netflix shares, valuation on a price-to-earnings basis remains high at 173 — well above the S&P 500  of 18.5.

In a proxy statement from Netflix in April, the company asked shareholders to approve authorization to issue 5 billion shares, compared to the company's current authorization to issue 170 million, an almost 30-1 split.

Other measures approved at yesterday's meeting include the election of three new directors, and a measure allowing long time stock holders the ability to nominate up to 25% of the board, according to Bloomberg.

In addition to the split, Netflix announced plans to launch new markets in Portugal, Spain and Italy in October, 2015. This could mean as many as 1 million new subscribers by the end of 2015, and 7 million by the end of 2020, according to Cowen and Company, a New York based investment firm.

Netflix could also introduce a market in Japan later this year, which could net the company 9.5 million new users by the end of 2020, according to Cowen and Company.

According to IHS technology, a technology research firm, Netflix could see 95.6 million subscribers globally by the year 2019.

"At a $25 billion to $30 billion market gap, there's a lot of growth priced into that," Reed Hastings, CEO of Netflix said on an investor call in April. "60 million to 90 million (users) feels great to us. We're continuing to grow."

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, 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."

You can view the full analysis from the report here: NFLX Ratings Report

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