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The FAANG team of mega cap stocks developed hefty returns for investors during 2020.

The group, whose members consist of 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 individuals sheltering into position used the products of theirs to shop, work as well as entertain online.

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

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

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

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

Within a year of the launch of its, the DIS’s streaming service, Disney+, now has more 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 members as of September.

These successes by Disney+ arrived at the same time Netflix has been reporting a slowdown in its subscriber growth. Netflix in October reported it included 2.2 million members in the third quarter on a net basis, short of the forecast of its in July of 2.5 million brand new subscriptions for the period.

But Disney+ is not the sole headache for Netflix. AT&T’s (NYSE:T) WarnerMedia division is within the midst of a similar restructuring as it is focused on the new HBO Max of its streaming platform. Also, Comcast’s (NASDAQ:CMCSA) NBCUniversal is actually realigning its entertainment operations to give priority to the new Peacock of its streaming service.

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

to be able to enhance its money position, Netflix raised prices due to its most popular program during the final quarter, the second time the company has been doing so in as a long time. The action might possibly prove counterproductive in an atmosphere wherein individuals are losing jobs as well as competition is warming 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 last week raised very similar issues into 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 relatively even as two) the stay-at-home trade could be “very 2020″ in spite of a little concern over just how U.K. and South African virus mutations might have an effect on Covid-19 vaccine efficacy.”

His 12-month price target for Netflix stock is $412, about 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 business needs to show that it is still the top streaming choice, and that it is well positioned to protect the turf of its.

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

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