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The FAANG team of mega cap stocks manufactured 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 vastly from the COVID 19 pandemic as people sheltering into position used the products of theirs to shop, work as well as entertain online.

During the older 12 months alone, Facebook gained 35 %, Amazon rose seventy eight %, Apple was up eighty six %, Netflix saw a 61 % boost, along with Google’s parent Alphabet is actually up 32 %. As we enter 2021, investors are actually asking yourself if these tech titans, enhanced for lockdown commerce, will achieve very similar or even a lot better upside this year.

By this particular group of 5 stocks, we’re analyzing Netflix today – a high performer during the pandemic, it is today facing a unique competitive threat.

Stay-at-Home Appeal Diminishing?
Netflix has been one of the strongest equity performers of 2020. The company and the stock benefited from the stay-at-home environment, spurring desire for its streaming service. The stock surged about 90 % off the minimal it hit on March 16, until mid October.

NFLX Weekly TTMNFLX Weekly TTM
Nonetheless, during the previous 3 months, that rally has run out of steam, as the company’s main rival Disney (NYSE:DIS) acquired a great deal of ground of the streaming battle.

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

These successes by Disney+ arrived at the identical time Netflix has been reporting a slowdown in the subscriber growth of its. Netflix in October reported it added 2.2 million subscribers in the third quarter on a net schedule, light of its forecast in July of 2.5 million new subscriptions for the period.

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

Negative Cash Flows
Apart from rising competition, what makes Netflix a lot more weak among the FAANG class is the company’s tight cash position. Given that the service spends a great deal to create its exclusive shows and shoot international markets, it burns a good deal of money each quarter.

to be able to improve the money position of its, Netflix raised prices for its most popular program during the last quarter, the next time the company has been doing so in as several years. The action could prove counterproductive in an atmosphere in which people are losing jobs as well as competition is warming up. In the past, Netflix price hikes have led to a slowdown in subscriber development, particularly in the more mature U.S. market.

Benchmark analyst Matthew Harrigan last week raised very similar fears in the note of his, warning that subscriber growth might slow in 2021:

Netflix’s trading correlation with other prominent NASDAQ 100 and FAAMG names has now obviously broken down as 1) trust in the streaming exceptionalism of its is actually fading somewhat even as 2) the stay-at-home trade might be “very 2020″ in spite of a little concern over how U.K. and South African virus mutations can have an effect on Covid-19 vaccine efficacy.”

His 12-month cost target for Netflix stock is actually $412, aproximatelly 20 % below its present level.

Bottom Line

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

Investors seem to be taking a rest from Netflix stock as they hold out to see if that will happen.

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