The FAANG team of mega cap stocks produced hefty returns for investors during 2020. The group, whose members consist of Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) benefited vastly from the COVID-19 pandemic as individuals sheltering in place used the products of theirs to shop, work and entertain online.
Of the older year alone, Facebook gained 35 %, Amazon rose 78 %, Apple was up 86 %, Netflix discovered a 61 % boost, as well as Google’s parent Alphabet is up 32 %. As we enter 2021, investors are thinking in case these tech titans, optimized for lockdown commerce, will achieve very similar or even even better upside this season.
From this particular number of 5 stocks, we are analyzing Netflix today – a high-performer during the pandemic, it’s now facing a unique competitive threat.
Stay-at-Home Appeal Diminishing?
Netflix has been one of probably the strongest equity performers of 2020. The business enterprise and its stock benefited from the stay-at-home environment, spurring desire due to its streaming service. The stock surged aproximatelly ninety % from the low it hit on March sixteen, until mid October.
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Nevertheless, during the past three weeks, that rally has run out of steam, as the company’s key rival Disney (NYSE:DIS) gained considerable ground in the streaming battle.
Within a year of the launch of its, the DIS’s streaming service, Disney+, now has greater than eighty million paid subscribers. That is a tremendous jump from the 57.5 million it found in the summer quarter. That compares with Netflix’s 195 million members as of September.
These successes by Disney+ came at exactly the same time Netflix has been reporting a slowdown in the subscriber growth of its. Netflix in October found it included 2.2 million subscribers in the third quarter on a net schedule, short of the forecast of its in July of 2.5 million brand new subscriptions for the period.
But Disney+ isn’t the only headache for Netflix. AT&T’s (NYSE:T) WarnerMedia division is in the midst of a similar restructuring as it is focused on its new HBO Max streaming wedge. As well, Comcast’s (NASDAQ:CMCSA) NBCUniversal is actually realigning its entertainment businesses to give priority to its new Peacock streaming service.
Negative Cash Flows
Apart from growing competition, the thing that makes Netflix more weak among the FAANG team is the company’s tight money position. Because the service spends a lot to develop its extraordinary shows and capture international markets, it burns a lot of cash each quarter.
to be able to improve its money position, Netflix raised prices for its most popular plan during the last quarter, the next time the company did so in as a long time. The move could prove counterproductive in an atmosphere where individuals are losing jobs as well as competition is heating up. In the past, Netflix priced hikes have led to a slowdown in subscriber growth, especially in the more mature U.S. market.
Benchmark analyst Matthew Harrigan previous week raised similar concerns in the note of his, warning that subscriber advancement might slow in 2021:
“Netflix’s trading correlation with various other prominent NASDAQ 100 and FAAMG names has now obviously broken down as one) trust in its streaming exceptionalism is actually fading somewhat even as 2) the stay-at-home trade might be “very 2020″ even with a bit of concern about how U.K. and South African virus mutations might affect Covid-19 vaccine efficacy.”
The 12 month price target of his for Netflix stock is actually $412, about 20 % beneath its present level.
Netflix’s stay-at-home appeal made it both one of the greatest mega hats as well as tech stocks in 2020. But as the competition heats up, the business enterprise needs to show that it continues to be the top streaming option, and that it is well positioned to defend the turf of its.
Investors appear to be taking a break from Netflix stock as they hold out to determine if that could occur.