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The FAANG group of mega cap stocks produced hefty returns for investors throughout 2020.

The group, whose members include Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) benefited immensely from the COVID 19 pandemic as folks sheltering in its place used their devices to shop, work as well as entertain online.

During the older year alone, Facebook gained 35 %, Amazon rose 78 %, Apple was up eighty six %, Netflix discovered a sixty one % boost, as well as Google’s parent Alphabet is actually up 32 %. As we enter 2021, investors are thinking if these tech titans, optimized for lockdown commerce, will provide similar or even much more effectively upside this year.

From this particular group of five stocks, we are analyzing Netflix today – a high performer throughout the pandemic, it is today facing a distinctive competitive threat.

Stay-at-Home Appeal Diminishing?
Netflix has been one of probably the strongest equity performers of 2020. The business and the stock benefited from the stay-at-home environment, spurring desire for its streaming service. The stock surged about ninety % from the low it hit on March 16, until mid October.

NFLX Weekly TTMNFLX Weekly TTM
Nonetheless, during the past three weeks, that rally has run out of steam, as the company’s primary rival Disney (NYSE:DIS) acquired considerable ground of the streaming battle.

Within a year of its launch, the DIS’s streaming service, Disney+, today has greater than 80 million paid subscribers. That is a significant jump from the 57.5 million it found in the summer quarter. That compares with Netflix’s 195 million subscribers as of September.

These successes by Disney+ came at exactly the same time Netflix has been reporting a slowdown in its subscriber growth. Netflix in October discovered that it added 2.2 million subscribers in the third quarter on a net foundation, light of the forecast of its in July of 2.5 million brand new subscriptions for the period.

But Disney+ isn’t the only headache for Netflix. AT&T’s (NYSE:T) WarnerMedia division is within the midst of a comparable restructuring as it focuses primarily on the new HBO Max of its streaming wedge. Too, Comcast’s (NASDAQ:CMCSA) NBCUniversal is realigning its entertainment businesses to give priority to its new Peacock streaming service.

Negative Cash Flows
Apart from growing competition, the thing that makes Netflix a lot more vulnerable among the FAANG group is the company’s small money position. Because the service spends a lot to develop its extraordinary shows and shoot international markets, it burns a lot of money each quarter.

to be able to improve its cash position, Netflix raised prices for its most popular plan throughout the very last quarter, the second time the company has been doing so in as many years. The move might prove counterproductive in an environment where people are losing jobs as well as competition is heating up. In the past, Netflix price hikes have led to a slowdown in subscriber development, especially in the more mature U.S. market.

Benchmark analyst Matthew Harrigan previous week raised similar fears into the note of his, warning that subscriber growth may well slow in 2021:

Netflix’s trading correlation with other prominent NASDAQ 100 and FAAMG names has now clearly broken down as one) trust in its streaming exceptionalism is actually fading somewhat even as two) the stay-at-home trade might be “very 2020″ even with some concern over how U.K. and South African virus mutations might affect Covid-19 vaccine efficacy.”

The 12-month price target of his for Netflix stock is $412, about twenty % beneath the present level of its.

Bottom Line

Netflix’s stay-at-home appeal made it both one of the best mega hats and tech stocks in 2020. But as the competition heats up, the company has to show that it is the high streaming option, and that it is well-positioned to defend the turf of its.

Investors seem to be taking a break from Netflix inventory as they wait to see if that can occur.

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