Netflix (NFLX) Stock Surging on Stock Split

NEW YORK (TheStreet) -- Shares of Netflix (NFLX) are surging 4.75% to $677.87 after its shareholders on Tuesday approved an increase in the number of shares the company is authorized to issue, leading the way for a stock split, Bloomberg reported.

At the video streaming giant's annual meeting in Los Gatos, California, CEO Reed Hastings said that its management will "seek approval from the board of directors 'in due course' to pursue a stock split," a Netflix spokeswoman said, according to Reuters.

Hastings stated that a stock split and lower price would make the stock more accessible, Bloomberg added.

The exact ratio for the split is not yet known, CNBC.com noted.

Separately, 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."

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

  • NFLX's revenue growth has slightly outpaced the industry average of 19.0%. 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

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