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.