Netflix stock is down 30 percent from its high, and earnings are about to come out. Whether this is a buy or not comes down to what analysts think of a no-holds-barred streaming war with some fierce competition.
Netflix’ FAANG days are rather lackluster of late. It’s been outshined by Facebook, Apple, Amazon and Google for a year now.
True, in late September, all FAANG stocks plummeted, losing some $58 billion after Trump went on an anti-tech rampage about too much power for tech. But taken as a whole, FAANG stocks have seen a $629-billion rise so far this year.
Netflix, though, has been the dimmest star in this universe.
In mid-July, it failed to impress with Q2 earnings. The numbers were worse than expected and the stock moved into definitive bear territory on data showing that a short-fall it new subscriber estimates, and on the premise that growth outlook is shrinking amid a sea of competition.
Over the past 52 weeks, Netflix is down around 22 percent.
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On October 16, Netflix is due to report its Q3 earnings, and the bears as certainly not convinced that it will be anything to write home about. While Netflix has given us strong Q3 guidance, meeting that might not be enough to move the share price. Netflix has forecast up to 750,000 paid subscriber additions in the third quarter.
What’s worse: The competition is about to get even stiffer. Related: SoftBank Reeling After Questionable WeWork Investment
Apple is hitting the original programming hard for its upcoming Apple TV+ streaming service, which will launch on November 1st.
This is war, make no mistake, and so far, Netflix isn’t armored up enough. There aren’t any more friendly partnerships. Everyone’s an enemy.
Disney has now banned Netflix as streaming becomes the solid front line for entertainment. Apple and Disney are bringing in the tanks.
The bears think Netflix has met its match with Disney, first and foremost, and in combination with Apple, even more so.
Evercore ISI analyst Vijay Jayan has slashed his price target on NFLX shares to $300 from $380, saying that investors are jittery about the business model in the face of growing competition over the coming months, MarketWatch reported.
But not everyone is ready to throw the towel in for Netflix when it comes to the streaming throne. Some think the bull case still remains intact. Keep in mind that Netflix has a huge lead in subscribers and tons of programming so it’s still very much in this game. Domestically, it boasts some 60 million subscribers, and 91.5 million internationally.
Bernstein analyst Todd Juenger says that the narrative has shifted now and Netflix is no longer untouchable, largely thanks to Disney. But he also sees a “false dichotomy”.
“Disney+ should not hurt Netflix,” Barrons quoted him as saying. “It is not a substitute, it is a complement… these are at least independent products, possibly even complementary products. But definitely not an ‘either/or’ decision for a consumer.”
With that in mind, Juenger is the odd man out, reiterating an ‘outperform’ rating and $450 price target on Netflix. Even if Disney+ is getting all the headlines, Netflix still has legs to lift its stock with more original shows and a bigger international audiences.
In other words, Netflix might have lost its FAANG, but it hasn’t lost its throne—yet, even if competition means it’s going to have to work a lot harder to keep it.
By Michael Kern for Safehaven.com