Netflix Is Short-Sellers’ Favorite FAANG Stock



It remains to be seen what 2020 has in store for Netflix (NFLX) stock. But 2019 was a rough year for NFLX. The stock gained 21% in 2019, underperforming all FAANG peers. FAANG is the acronym CNBC’s Jim Cramer coined to refer to America’s high-flying tech stocks. In addition to Netflix, the other FAANG stocks are Facebook (FB), Apple, Amazon (AMZN), and Google parent Alphabet (GOOGL).

Apple and Facebook stocks led the FAANG group in 2019, gaining 86% and 57%, respectively. Alphabet and Amazon stocks gained 28% and 23%, respectively.

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Netflix stock has the largest pool of pessimistic investors in the FAANG group

Among FAANG stocks, Netflix stock has the highest short interest, of 5.53%. Short interest in Apple stock stands at 1.43%, while short interest in Facebook stock is 1.17%. Amazon’s and Alphabet’s short interest is 0.85% and 0.51%, respectively. Therefore, Netflix has the largest pool of investors among FAANG stocks betting that its stock will decline from its current price.

Even Netflix video streaming competitors Walt Disney (DIS), AT&T (T), and Comcast (CMCSA) have lower short interest, of 1.05%, 1.36%, and 1.73%, respectively.

Netflix under pressure to defend its turf in the video streaming market

Netflix stock’s dismal performance last year came on the back of the company’s struggle with surging competition. The company missed its own subscriber growth targets in the second and third quarters, which weighed on the stock.

Netflix has entered 2020 on the defensive. Disney’s Disney+ is shaping up to be a serious threat. Disney+ arrived with a bang, signing up over 10 million subscribers on its first day. Early estimates showed Netflix was holding its own against Disney+. But recent estimates show Netflix may have lost more than 1.0 million subscribers to Disney+.

At $6.99 per month, Disney+ costs significantly less than Netflix, whose standard plan costs $12.99 per month. For $12.99, Disney offers a bundled plan that includes Disney+, ESPN+, and Hulu. Disney+ is waging a price war just as Netflix is struggling with its pricing strategy. The Netflix-Disney+ competition may only escalate this year as Disney+ enters more countries.

And Disney+ isn’t Netflix’s only headache. AT&T and Comcast also plan to launch video streaming services this year that will compete with Netflix. Additionally, AT&T and Comcast are pulling their hit shows from Netflix, which could also cost Netflix subscribers.


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