The story behind Netflix, Inc. (NFLX) is fascinating. After the video streaming service’s ill-fated (and short-lived) Quikster spin-off, the stock plunged to $50 per share in 2012. Fast forward three years later to today, and the stock has broken through $500 for the first time. The driver was the company’s shockingly good first-quarter earnings report. While NFLX is grabbing headlines today, is this enough to ensure a buy recommendation over the long run? Or is $500 simply too high a price tag for the stock? Let’s find out.
Netflix reported its first-quarter results after the market closed yesterday. Notably, the streaming giant added 4.9 million new members globally, topping its forecast of 4.1 million. Compared with Q1 2014, adjusted earnings per share rose 6.9% to $0.77, beating consensus estimates of $0.69. Meanwhile, revenue jumped 23.6% year-over-year to $1.57 billion, in line with expectations.
Following the report, NFLX shares surged 18% today and are now trading over $560.
Looking ahead to the second quarter, NFLX should continue to gain momentum as analysts are projecting $0.90 earnings per share on revenues of $1.66 billion.
NFLX is starting off fiscal year 2015 on strong note, so the stock has been upgraded in Portfolio Grader. This is because NFLX’s buying pressure is solid, earning a B for its Quantitative Grade. Meanwhile, the company’s fundamentals are also pretty strong. Netflix currently receives solid ratings for sales growth, operating margin growth, earnings growth, earnings surprises, return on equity and cash flow. Overall, NFLX earns a B for its Fundamental Grade. And as of this posting, I consider NFLX a B-rated buy.
As earnings season continues, I encourage checking back on my daily blog for updates. For more stock grades, please visit my Portfolio Grader website !