Netflix Stock: One Chart Every Netflix Bull Will Love To See
With Netflix, Inc. original content leading the popularity charts, the best days of Netflix stock are still to come.
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Netflix (NASDAQ:NFLX), the Reed Hastings led online streaming leader, has had a good year. Netflix stock is up by nearly 45% this year, crushing the 18.9% gains of the Nasdaq Composite (INDEX:COMPX) and also outperforming the S&P 500’s (INDEX:SPAL) 10.1% rise in the same time frame. The stock closed the last trading session at $179 a piece, less than 7% from its all time high of $191.5 it had hit in late July. The all-time highs were followed by news of Walt Disney (NYSE:DIS) pulling the plug on its content partnership with Netflix, which saw the stock fall below key support levels. However, Netflix stock has been gaining some sort of momentum in the last few trading sessions. We believe that Netflix bulls are in for more upside. Here is why.
Netflix, Inc. Leads The Online Streaming Charge
It’s no secret that online streaming is quickly becoming the default for consumption of media content. Cord-cutting has been hurting companies like Disney and Comcast (NASDAQ:CMCSA), while the likes of Netflix, Amazon Prime and Hulu have been gaining traction. Disney lost 750K pay TV subscribers to cord-cutting in Q1 2017, and if that wasn’t bad enough, the company lost another million to the trend in the second quarter of this year. In more recent news, Comcast warned that it could lose up to 150K subscribers in Q3, citing competition and Hurricane Harvey. The result was that Comcast stock dropped by a massive 6.2% in the last trading session, which was its worst trading day in over 6 years.
On the other end of the spectrum, Netflix, Amazon Prime and Hulu have been gaining ground. And, Netflix is the leader of the pack with over 100 million users, a milestone it had crossed recently. According to research firm eMarketer, over 61% of respondents in a Hub Research poll said they were Netflix subscribers, the highest penetration rate among the most popular SVOD (subscription video on demand) service providers.
eMarketer forecasts that Netflix will continue to lead the charge in the online streaming space with over 140 million subscribers by 2021. The research agency estimates that Netflix will continue to dominate the market and ‘will have almost 142 million US viewers in 2021, representing 67.5% of over-the-top (OTT) video service users. By then, Amazon will reach 47.2% of OTT video service users (nearly 99 million video viewers), while Hulu will reach 18.9% (39.5 million viewers).‘
Original Content Is A Key Competitive Advantage
There is no doubt that online streaming is rapidly gaining ground. In an environment of rising competition, companies have turned to original programming as a means of product differentiation. This is evident from the billions of dollars which Netflix, Amazon and other competitors have been pouring into original content programming. Netflix is expected to spend over $6 billion on content this year, while Amazon is expected to pour $4.5 billion into original programming. To put things in perspective, Netflix and Amazon are expected to outspend NBC and HBO.
Estimated 2017 content budget per “TV” studio pic.twitter.com/kfBeLH0r2K
— Bluegrass Capital (@BluegrassCap) April 17, 2017
Netflix Stock Will Gain From Extremely Popular Content
As a fellow Amigobulls contributor had written a while ago, original content programming is a moat for Netflix. As the popular adage goes, ‘the proof of the pudding lies in the eating.’ Similarly, the success of Netflix’s in-house content can be gauged from the buzz it creates. This brings us to the one chart every Netflix bull would love to see (chart credit: Statista).
As is clear from the chart above, Netflix is topping the popularity chart, occupying 9 out of the 10 spots on that list. To put it in another way, if Original content programming is indeed the ‘moat’ it is being made out to be, the best days for Netflix stock investors lie ahead.
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