uploads/2019/11/Netflix-stock.jpeg

Should You Sell Netflix Stock before HBO Max and Peacock Arrive?

By

Updated

Netflix (NFLX) stock is up 13% year-to-date, making it the slowest FAANG stock this year. The other FAANG stocks—Facebook (FB), Apple, Amazon (AMZN), and Google parent Alphabet (GOOGL)—have risen 52%, 67%, 17%, and 26%, respectively.

Article continues below advertisement

Investor concerns over escalating competition hurt Netflix stock

Netflix stock has been under pressure this year. Investors have largely shunned it on fears that escalating competition might slow Netflix’s subscriber growth. Netflix stock saw a big sell-off in summer after the company reported losing nearly 130,000 US subscribers.

The video streaming giant added 6.8 million subscribers in the third quarter, below its target of 7.0 million subscribers. The company expects to add 7.6 million subscribers in the current quarter. That figure would be below the 8.8 million subscribers it added in last year’s fourth quarter. Netflix said it had factored the competition headwinds it expects from Disney+ and Apple TV+ into its fourth-quarter growth guidance.

Investors may have reasons to worry about Netflix’s escalating competition. Walt Disney’s (DIS) Disney+ and Apple TV+ are just the latest competitors in Netflix’s market. And the company is set to face more competition next year. AT&T is gearing up to launch a new subscription video service, HBO Max, next May. HBO Max is slated to become the new home for Friends, which AT&T has pulled from Netflix.

Comcast (CMCSA) is also gearing up to enter the market. Comcast plans to launch its Peacock video streaming service next April, as a fee-based plan and an ad-supported free plan. Peacock is slated to become the new home for The Office, another hit show leaving Netflix.

Article continues below advertisement

Room for Netflix and others to succeed

As much as competition poses a huge threat to Netflix, the company has opened a wide lead that rivals may take years to close. Netflix finished the third quarter with over 60 million US subscribers, more than doubling Hulu’s US subscriber base. Disney-controlled Hulu is among Netflix’s closest US competitors.

Additionally, there’s room for Netflix and other video services to succeed in the US, where households typically subscribe to more than one video streaming service. Netflix CEO Reed Hastings said this month that he expected Americans to continue subscribing to multiple video services.

Media research analyst Michael Nathanson says Americans are willing to spend as much as $45 per month on video streaming subscriptions. Therefore Netflix customers may subscribe to new services such as Disney+ without having to drop Netflix. Netflix’s most popular plan costs $12.99 per month. Meanwhile, Disney+, Apple TV+, and HBO Max cost $6.99, $4.99, and $14.99 per month, respectively. Given that Netflix may be able to stay competitive in the crowded video streaming market, investors may be unfairly punishing Netflix stock.

Advertisement

More From Market Realist