Today’s Momo Momentum Stock Is Netflix (NFLX)

By Daniel Mirkin Follow08/18/14 – 10:14 AM EDT

Get TheStreet Quant Ratings’ exclusive 5-page report for (NFLX) now.

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 or Stephanie Link.

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 $950.4 million.

NFLX has a PE ratio of 135.0.

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 0.6%.

‘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. operates as an Internet television network, is engaged in the Internet delivery of TV shows and movies directly on TVs, computers, and mobile devices in the United States and internationally. NFLX has a PE ratio of 135.0. Currently there are 16 analysts that rate Netflix a buy, 4 analysts rate it a sell, and 8 rate it a hold.

The average volume for Netflix has been 2.7 million shares per day over the past 30 days. Netflix has a market cap of $27.1 billion and is part of the services sector and media industry. The stock has a beta of 2.26 and a short float of 9.2% with 2.84 days to cover. Shares are up 22.5% 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 buy. 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 the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results.

Highlights from the ratings report include:

The revenue growth came in higher than the industry average of 7.9%. Since the same quarter one year prior, revenues rose by 25.3%. Growth in the company’s revenue appears to have helped boost the earnings per share.
Powered by its strong earnings growth of 134.69% and other important driving factors, this stock has surged by 72.21% 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 ($3.88 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 141.0% when compared to the same quarter one year prior, rising from $29.47 million to $71.02 million.
The gross profit margin for NETFLIX INC is currently very high, coming in at 81.65%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 5.29% is above that of the industry average.