ICARUS RADAR:NFLX
EPS Announcement October 16 (After Market Close)
Overview
NFLX Vs SPY. Source: Tradingview
We have had Netflix (NFLX) identified as an Icarus stock for quite some time, meaning we believe it’s bubble is bursting and is a great short candidate. Since peaking at over $380/ share in early July, NFLX has gone on a tumultuous ride, at one point losing more than 30% when falling to below $255 last week. It has rebounded somewhat and clawed its way back over $270 with help of a JP Morgan analyst boosting his price target to $425/share.
Many other analysts are reiterating buy ratings, saying that the bad news is already priced in. This very well could be true, but how response is simple: The long term growth is already priced in as well.
Outlook
There is no denying that Netflix provides a great service. Nearly everyone and their mother uses the service to stream some of their favorite shows… and therein lies one of the problems. How many more new users can the company expect to bring in? How much higher can they raise monthly subscription prices when their premium service already costs $15.99/ month? With these factors and added competition from big players who know a thing or two about attracting customers and delivering quality content (Apple, Amazon, Disney), we see Netflix’s competitive advantage fading.
We’ve stated our concerns previous in a previous newsletter, where we outlined Disney’s new streaming services as Netflix’s primary competition due in large part to:
Disney’s brand power and know-how
Disney’s plethora of content. They are literally sitting on nearly a century’s worth of content. They reboot any of their timeless classics or simply re-release countless titles on their streaming platform that would garner instant success.
Disney’s original content and future content. The Marvel and Star Wars universe against Stranger Things and Narcos? Please.
Now, two of Netflix’s biggest competitors are joining forces. As of October 1st, Amazon has teamed with Disney to bring Disney’s movies and shows to all of their Amazon Prime streaming customers in Latin America. Source: Bloomberg.