Why Netflix Outperformed Its FAANG Peers Yesterday



It’s been a tough year for Netflix (NFLX), but yesterday, it closed the day as the best-performing stock among its FAANG peers. The stock popped 1.44% on the day. Facebook (FB) and Apple registered gains of 0.68% and 0.43%, respectively, yesterday. However, Amazon (AMZN) and Alphabet (GOOGL) fell 0.12% and 0.09%, respectively.

Netflix stock jumped on September 9 following positive comments by Bank of America analysts. According to analysts, there’s been a significant increase in Netflix app downloads in the third quarter. In a note to investors cited by CNBC, Bank of America analysts wrote that Netflix app downloads are up 18% year-over-year in the current quarter. App downloads don’t necessarily equate to new subscribers, but more app downloads is no doubt a positive sign in terms of interest in Netflix’s service.

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Subscriber growth miss

When Netflix reports its third-quarter earnings results sometime next month, its subscriber growth will be in focus. In the second quarter, it shocked investors when it both lost US subscribers and missed its international subscriber growth target. Its stock has been under pressure since then, becoming the worst-performing FAANG stock in 2019.

A combination of factors led to Netflix’s disappointing subscriber growth in the second quarter. Firstly, there was the issue of the company’s new shows not drawing new subscribers at the rate it had expected. “We think Q2’s content slate drove less growth in paid net adds than we anticipated,” it told shareholders in July.

Secondly, some customers decided to cancel their subscriptions after the company hiked prices. “Our missed forecast was across all regions, but slightly more so in regions with price increases,” it said in July.

Disney tries to capitalize on Netflix’s pricing woes

As we discussed last month, nearly one-quarter of Netflix’s US customers now feel the service has become too expensive. Competitors now seem to want to capitalize on the company’s pricing problem. Disney (DIS) has priced its upcoming Disney+ video service at $6.99 per month—about half what Netflix charges for its most popular plan, which costs $12.99 per month.

Disney+ will also be cheaper than Netflix’s basic plan, which costs $8.99 per month. As if to try to get more Netflix subscribers to switch, Disney also recently provided US consumers access to its Disney+ service for less than $4 per month.

We believe Disney’s aggressive pricing of its Disney+ service has contributed to the pressure on Netflix stock this year.


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