Netflix Growth Possibly at Risk
Recent analysis on the stock market show the coronavirus outbreak is negative on Netflix stocks. Analysts believe the recent expectations the company will benefit from the “stay at home trend” would likely prove false.
Analyst Laura Martin wrote the COVID-19 is negative for NFLX because it charges a fixed amount per month. It does not benefit economically from additional viewing hours by its subscribers. She added its subs and revenue growth offshore is increasingly at risk as COVID-19 spreads because NFLX is a luxury.
In the wake of the pandemic, more international subscribers will cancel their service. With travel restrictions, a large part of the hospitality industry will be out of work.
Netflix continues to see gains today following its 4% rebound with the rest of the market yesterday. It’s currently at 364.13 USD or 5% higher in stock trading.
Netflix’s Stay at Home Appeal
Last week, investors bet subscriptions would rise as consumers kept themselves at home, driving shares higher. In the wake of the outbreak, it was one of the top performers in the S&P 500.
That means more business for digital service providers. The same mentality prompted Wall Street to come out with lists of “stay at home” stocks to benefit from it.
The global situation could spark a recession, so the stay at home mentality was thought to be good for the company. Other stay at home stocks are video-conferencing service Zoom and Peloton, the maker of the home-exercise bike and streaming service. Other stay at home stocks also included Clorox and Campbell Soup, the heavily featured internet and delivery stocks.
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Competition Threatens Netflix Superiority
The king of streaming services needs to “reinvent” itself to stay on top of the competition. Giants like The Walt Disney Company, Apple Inc, and Amazon.com are coming in with a strong competitive advantage.
NFLX has the superior market share to its competitors, but it is behind in other fronts. Apple is in a much better financial position, while Disney has a pre-existing library of titles with its tv shows and film productions.
The company must take vital actions to stay fresh and increase profitability. Perhaps, it should look into mergers and acquisitions, leverage data, and add sports streaming to its service. With those, we might see a different analysis for its future.
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