Netflix was destined from the beginning to be one of the most successful stay-at-home stocks from the start of the pandemic. The company has seen astonishing new subscriber numbers this year, totaling over 28.1 million in the first three quarters.
Their revenue is also up 18% in the last fiscal year, with three-year gains bringing revenue from $11.7 billion to nearly $20.2 billion. At the same time, their operating income has grown 287% from $839 million to nearly $2.6 billion.
But now, the company’s massive success has come to bite their stock in the rear.
The technology and media giant dropped over $24 in after-hour trades on Tuesday alone after their Q3 earnings report spooked investors.
The drop came on news that Netflix only raked in 2.3 million subscribers in Q3 against their forecast of 2.5 million new accounts. (Some analysts in Wall Street had predicted that Netflix could net up to 5 million new accounts.)
However, the discrepancy is hardly cause for concern.
When Pulling Forward Pushes Back
Netflix has warned Wall Street for months of the “pull forward in demand” effect that the pandemic would have on subscriber numbers. This idea refers to the fact that stay-at-home companies would see a boost in demand early on that would inevitably have to taper off.
In other words, by raking in sales numbers that couldn’t continue (let alone grow), companies would suffer in later quarters as a result.
Netflix acknowledged the effects of the pull forward in demand in their report, stating that “record first half results” ate into late-year growth “as expected.” The company also stated that they have maintained “healthy” retention rates throughout the quarter, with increased engagement among households.
Even with such massive growth thus far, Netflix is forecasting another 6 million new paid memberships heading into the holiday season.
What Does This Mean for Investors?
Qai’s deep-learning AI has the answer. Our artificial intelligence software scours investment data to determine the best play based on past performance, technical markers, and the occasional whiff of predictive analysis. The results are in – and it’s time to share what the numbers have to say.
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Netflix Inc (NFLX) By the Numbers
However, the stock is still up 48.3% for the year on the back of three excellent quarters.
Furthermore, their EPS has ballooned 395% in the last three fiscal years, with almost 50% growth occurring over the last year. This brings per-share earnings up from $1.25 to $4.13.
Not to mention, the company’s ROE has nearly doubled from 17.9% to 29.1%.
Currently, Netflix is trading with a forward 12-month P/E of 56.54. Their revenue is expected to grow by 13.5% over the next year.
So, What’s the Verdict?
Netflix has had an excellent year in both their stock prices and their balance sheet. But how do they rate with our AI?
After analyzing the data, Q.ai’s artificial intelligence has rated Netflix, Inc with an A in Growth, B in Low Momentum Volatility, C in Quality Value, and a D in Technicals.
Between the company’s report card and dipping stock prices that signal a new wave of future gains, Netflix is rated Attractive for the month of October.
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