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

The team, 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 people sheltering into position used their products to shop, work and entertain online.

Of the previous year alone, Facebook gained thirty five %, Amazon rose 78 %, Apple was up 86 %, Netflix saw a 61 % boost, along with Google’s parent Alphabet is up thirty two %. As we enter 2021, investors are thinking in case these tech titans, enhanced for lockdown commerce, will provide very similar or even better upside this year.

By this number of 5 stocks, we’re analyzing Netflix today – a high performer during the pandemic, it’s today facing a distinctive competitive threat.

Stay-at-Home Appeal Diminishing?
Netflix has been one of the strongest equity performers of 2020. The business enterprise and the stock benefited from the stay-at-home environment, spurring desire because of its streaming service. The inventory surged aproximatelly 90 % off the reduced it hit on March sixteen, until mid-October.

NFLX Weekly TTMNFLX Weekly TTM
Nevertheless, during the previous three weeks, that rally has run out of steam, as the company’s primary rival Disney (NYSE:DIS) gained considerable 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 significant jump from the 57.5 million it reported to the summer quarter. Which compares with Netflix’s 195 million subscribers as of September.

These successes by Disney+ came at the same time Netflix has been reporting a slowdown in its subscriber development. Netflix in October found it added 2.2 million members in the third quarter on a net basis, light of the forecast of its in July of 2.5 million new subscriptions for the period.

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

Negative Cash Flows
Apart from rising competition, the thing that makes Netflix much more vulnerable among the FAANG team is the company’s tight cash position. Given that the service spends a lot to create its extraordinary shows and capture international markets, it burns a good deal of cash each quarter.

In order to enhance its cash position, Netflix raised prices for its most popular plan throughout the final quarter, the second time the company has done so in as many years. The action might prove counterproductive in an atmosphere where folks are losing jobs as well as competition is heating up. In the past, Netflix price hikes have led to a slowdown in subscriber growth, particularly in the more mature U.S. market.

Benchmark analyst Matthew Harrigan previous week raised very similar concerns into the note of his, warning that subscriber advancement could possibly slow in 2021:

Netflix’s trading correlation with other prominent NASDAQ 100 and FAAMG names has now obviously broken down as 1) confidence in the streaming exceptionalism of its is fading relatively even as two) the stay-at-home trade might be “very 2020″ even with some concern over just how U.K. and South African virus mutations could affect Covid 19 vaccine efficacy.”

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

Bottom Line

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

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

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