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How Much Longer Can Netflix Reign King Of Streaming?
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The world is stuck at home, and what better way to occupy time than streaming the ultimate pandemic entertainment, “Tiger King” on Netflix (NFLX - Free Report) . Netflix could not have released this bizarre yet somehow alluring mini-series at a better time and attracted 64 million households in the first four weeks. “Tiger King” added to the extensive catalog of content on Netflix’s leading streaming platform. The world of streaming is hot right now, and Netflix’s earnings last night illustrated that.
The streaming king released its Q2 quarterly results after close yesterday and reported nearly 16 million new subscribers, more than doubling estimates. Netflix now has 182 million subscribers worldwide.
Despite this seemingly positive news, the stock traded down this morning as investors weighed the long-term sustainability of its subscriber growth and ability to maintain its current level of content creation.
NFLX shares are up roughly 30% year-to-date, hitting all-time highs last week, due to the rare short-term tailwind that this pandemic has put in its sails. This rally more than priced in the anticipated strong Q2 results and NFLX’s slide today reflects investors trimming positions with optimism satisfied.
Still, this streaming pioneer is not entirely immune to the novel coronavirus. Netflix has shut down the production of upcoming shows and movies across the world amid the shelter-in-place initiative. According to the letter to shareholders, “almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland.” This will positively impact cash-flows for 2020, but the longer this shut down lasts, the dryer Netflix’s content pipeline will become.
Competition Is Steepening
Content is king in the saturating streaming world, and if Netflix’s content gets stale, it’s only a matter of time before it starts seeing subscription declines. Netflix is now swimming with the sharks as all the major media players enter the space. Disney+ (DIS - Free Report) was released last fall and has already accumulated 50 million subscribers, with its international presence only beginning to ramp up. Comcast (CMCSA - Free Report) released its streaming service, Peacock, to Xfinity customers on April 15th and is releasing it universally on July 15th. AT&T (T - Free Report) is launching HBO MAX May 27th, and this will encompass the massive content library of WarnerMedia Entertainment.
I believe that Netflix is in for a rude awakening when these media conglomerates enter the streaming market, and the pandemic tailwind turns into a headwind. Netflix’s newly produced content frankly cannot compete with the decades of movies, and TV shows that its competitors have in their vaults.
I am somewhat bearish on NFLX and would limit my exposure to this stock at its current price level. I think this stock is due for a pullback.
Take Away
Netflix showed investors all they needed to see in its Q2 report, and they are trimming their positions. The competition in the space is already steep and now media giants like AT&T and Comcast are entering the arena with decades of content at their disposal. With content production at a standstill, Netflix is at risk of losing customers to these new streaming services. NFLX is way too expensive for me to consider buying, and if I were a shareholder, I would consider reducing my exposure.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
How Much Longer Can Netflix Reign King Of Streaming?
The world is stuck at home, and what better way to occupy time than streaming the ultimate pandemic entertainment, “Tiger King” on Netflix (NFLX - Free Report) . Netflix could not have released this bizarre yet somehow alluring mini-series at a better time and attracted 64 million households in the first four weeks. “Tiger King” added to the extensive catalog of content on Netflix’s leading streaming platform. The world of streaming is hot right now, and Netflix’s earnings last night illustrated that.
The streaming king released its Q2 quarterly results after close yesterday and reported nearly 16 million new subscribers, more than doubling estimates. Netflix now has 182 million subscribers worldwide.
Despite this seemingly positive news, the stock traded down this morning as investors weighed the long-term sustainability of its subscriber growth and ability to maintain its current level of content creation.
NFLX shares are up roughly 30% year-to-date, hitting all-time highs last week, due to the rare short-term tailwind that this pandemic has put in its sails. This rally more than priced in the anticipated strong Q2 results and NFLX’s slide today reflects investors trimming positions with optimism satisfied.
Still, this streaming pioneer is not entirely immune to the novel coronavirus. Netflix has shut down the production of upcoming shows and movies across the world amid the shelter-in-place initiative. According to the letter to shareholders, “almost all filming has now been stopped globally, with the exception of a few countries like Korea and Iceland.” This will positively impact cash-flows for 2020, but the longer this shut down lasts, the dryer Netflix’s content pipeline will become.
Competition Is Steepening
Content is king in the saturating streaming world, and if Netflix’s content gets stale, it’s only a matter of time before it starts seeing subscription declines. Netflix is now swimming with the sharks as all the major media players enter the space. Disney+ (DIS - Free Report) was released last fall and has already accumulated 50 million subscribers, with its international presence only beginning to ramp up. Comcast (CMCSA - Free Report) released its streaming service, Peacock, to Xfinity customers on April 15th and is releasing it universally on July 15th. AT&T (T - Free Report) is launching HBO MAX May 27th, and this will encompass the massive content library of WarnerMedia Entertainment.
I believe that Netflix is in for a rude awakening when these media conglomerates enter the streaming market, and the pandemic tailwind turns into a headwind. Netflix’s newly produced content frankly cannot compete with the decades of movies, and TV shows that its competitors have in their vaults.
I am somewhat bearish on NFLX and would limit my exposure to this stock at its current price level. I think this stock is due for a pullback.
Take Away
Netflix showed investors all they needed to see in its Q2 report, and they are trimming their positions. The competition in the space is already steep and now media giants like AT&T and Comcast are entering the arena with decades of content at their disposal. With content production at a standstill, Netflix is at risk of losing customers to these new streaming services. NFLX is way too expensive for me to consider buying, and if I were a shareholder, I would consider reducing my exposure.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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