A number of companies have seen their stock prices soar as demand for their services or products increased due to people staying at home. These aren’t unscrupulous companies that are taking advantage of the situation, it’s just a situation where the products they offer are in greater demand. Some of the companies offer products that make it easier for people to work from home. Others offer services that offer entertainment at home or make it easier to shop from home.
Two companies that have seen a boost in business since stay at home orders were issued are Netflix (Nasdaq: NFLX) and eBay (Nasdaq: EBAY). Netflix has seen its stock rise approximately 60% from the March low. eBay’s stock is up over 125% from its low in March. Both companies are set to report second quarter earnings in the next few weeks and both companies are expected to show significant increases in earnings per share when compared to the previous year.
Netflix is expected to report earnings results on July 16. The current EPS estimate is at $1.81 and that is more than three times higher than the second quarter of 2019. In the second quarter of 2019 the company reported EPS of $0.60. In addition to the estimate being considerably higher than last year’s results, analysts have increased the EPS estimate. The current consensus estimate is for EPS of $1.81 and it was $1.53 just 90 days ago.
eBay is set to report on July 28 and it has also seen a big jump in its EPS estimate over the last 90 days. The current consensus estimate is for earnings per share of $1.05. 90 days ago the estimate was for EPS of $0.70. That is a 50% increase in the estimate and it is 54.4% higher than the $0.68 the company reported in the second quarter of last year.
Looking at the two companies on Tickeron’s platform, we see that both companies score very well in a number of categories. Both companies are ranked as “strong buys” on the Scorecard. eBay shows strong results in both the fundamental and technical analysis categories while Netflix shows better results on the technical side than it does on the fundamental side.
If we look at the fundamental analysis screener, we see that Netflix is overvalued at this time and it gets poor scores in its P/E Growth Rating and its Seasonality Score. eBay’s only negative mark is the P/E Growth Rating.
Netflix is trading at a trailing P/E ratio of 86.4 currently and the forward P/E is at 69.4. Those figures are contributing factors in the Valuation Rating being in the overvalued category. Despite the huge run up in the stock, eBay’s trailing P/E ratio is only 26.3 and its forward P/E is at 17.7.
Turning our attention to the technical analysis screener, both companies received bullish signals from the Aroon Indicator on July 9. Both have also received bullish signals from the MACD and Momentum Indicators in the last few weeks. Netflix got an additional bullish signal from its moving averages in mid-June.
Both stocks are overbought based on the stochastic indicators and the RSI indicator. Given the huge rallies both stocks have experienced in the last four months, that isn’t surprising.
The Tickeron Screener looks at the daily stochastics and the daily RSI indicator, but if you look more long term and use the weekly overbought/oversold indicators you would get a little bit of a mixed result. The weekly chart for Netflix shows that the weekly stochastic indicators are in overbought territory, but the RSI isn’t. For eBay, it’s a different story. With the stock jumping over 125% in approximately four months, both the weekly RSI and the stochastic indicators are in overbought territory. In fact, the 10-week RSI is the highest it has been since the fourth quarter of 2010.
Overall both Netflix and eBay look good as long-term investments, but the current overbought levels on the daily and weekly charts could be a sign that right now isn’t the time to buy. You also have to consider how much the hurdle has been raised for the upcoming earnings reports. Expectations appear to be extremely high at this time and that can make it difficult for the stocks, regardless of whether they beat estimates or not.
Moving higher for three straight days is viewed as a bullish sign. Keep an eye on this stock for future growth. Considering data from situations where NFLX advanced for three days, in of 300 cases, the price rose further within the following month. The odds of a continued upward trend are .
The Momentum Indicator moved above the 0 level on May 08, 2023. You may want to consider a long position or call options on NFLX as a result. In of 87 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for NFLX just turned positive on May 09, 2023. Looking at past instances where NFLX's MACD turned positive, the stock continued to rise in of 48 cases over the following month. The odds of a continued upward trend are .
NFLX moved above its 50-day moving average on May 05, 2023 date and that indicates a change from a downward trend to an upward trend.
The RSI Indicator demonstrated that the stock has entered the overbought zone. This may point to a price pull-back soon.
The Stochastic Oscillator entered the overbought zone. Expect a price pull-back in the foreseeable future.
Following a 3-day decline, the stock is projected to fall further. Considering past instances where NFLX declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
NFLX broke above its upper Bollinger Band on May 18, 2023. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.
The Aroon Indicator for NFLX entered a downward trend on May 11, 2023. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating outstanding price growth. NFLX’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. NFLX’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 89, placing this stock better than average.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (7.716) is normal, around the industry mean (4.253). P/E Ratio (40.816) is within average values for comparable stocks, (72.197). Projected Growth (PEG Ratio) (1.877) is also within normal values, averaging (2.646). NFLX has a moderately low Dividend Yield (0.000) as compared to the industry average of (0.058). P/S Ratio (5.356) is also within normal values, averaging (111.369).
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows