Netflix (NFLX), Texas Instruments (TXN) and ConocoPhillips (COP) filed quarterly reports Monday. Current valuations suggest Netflix is overvalued, Texas Instruments is fairly valued and ConocoPhillips is undervalued.
Netflix - Overvalued
- Q1 EPS of $-0.08 beats by $0.19. Revenue of $870 million (+28% Y/Y) in-line.
- High quality earnings on rising revenue and increasing subscriber growth.
- Negative net income as operating cash-flow/share declines.
- Declining stock price and declining price-to-sales ratio.
- Relative underperformer; trading below the declining 200-day moving average.
- Competitive forces and limited pricing power could weigh on revenue
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ConocoPhillips - Undervalued
- Profits are strongly correlated with the strength of the economy.
- Sector possesses high barriers to entry and minimal competition, although, pricing power is weak.
- Historically, the energy industry creates value for investors.
- Rising revenue and cash flow from operating activity and declining price/sales and price/operating cash flow.
- Decreasing unemployment favors inflationary macro-economic conditions over the next decade.
- Shares declined to the just about the 200-day simple moving average and could find trend-line support. The 50-day simple moving average is rising.
Texas Instruments - Fairly Valued
- The analog chips industry is fragmented; notwithstanding, the firms have strong pricing power.
- Historically, the semiconductor industry has created value for investors.
- The industry is mature with high barriers to entry and low growth.
- Economic growth is strongly correlated with earnings.
- Insiders sold the stock heavily at the end of January.
- Revenue/share and Cash flow from operations/share are declining.
- Shares are probably being distributed as the 50-day simple moving average flattened.
- Skillful traders may be able to short-sell this stock for a handsome profit.