Netflix’s reign is beginning to show its limitations

<p>Netflix (NASDAQ: NFLX) was once a king, but now tough competitors like Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL) and Disney (NYSE: DIS) are challenging for the video streaming throne. And with the new corona virus sending average people to toilet paper who end up in frenzy and investors in mass panic mode, the long-term history behind the NFLX stock has become even more complicated and questionable than before.

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On the one hand, you have people who say that “coronavirus cements the company as immobile”, while on the other hand you have made people say that it is clearly “the modern Blockbuster.”

These headlines embody the extremely bullish and bearish attitudes that investors are taking on Netflix right now. While not everyone sees things as one-sided as the headlines might suggest, this leaves us with the question – should you still consider buying NFLX shares?

Let’s take a closer look.

Mixed reviews for NFLX stocks

The story of Netflix has changed quite a bit over the years, with the company making a breakthrough from its streaming service in 2007. It then sprinted further with the debut of high-quality, exclusive programming with House of Cards in 2013. While the rewards from these benchmarks were not immediate, this development has ultimately enabled the NFLX stock to catapult more than 2,600% from its IPO of $ 15 in 2002 to its current price of around $ 405.

However, the streaming landscape since Netflix’s breakthrough success looks very different. Recently, the stock has not taken as many impressive steps as before.

The advent of the cord cutting business and Netflix’s first advantage in space helped drive the previous year. However, increasing competition and scrutiny of its content strategy have dampened this momentum.

This slowdown became even clearer after the company reported results for the first quarter of 2020 on April 21.

Although Netflix managed to put up some impressive new subscription numbers, it could not match Wall Street‘s expectations per earnings per share. And, as Louis Navellier noted, the company expects “viewers to decline and membership growth to slow as the United States and other countries repeal homeland security rules.”

So while the company is enjoying a significant boost during social shutdowns, the growth to its growth is unlikely to be forever when things start to return to a semblance of “normal”. In the company’s own words, “Intuitively, the person who did not join Netflix will probably not join soon after the inclusion.”

This reality is even more troubling when you consider the effects the virus has had on its exclusive content production in 2021. As Louis Navellier and InvestorPlace Research Staff also point out, this analyst “who questions Netflix’s business model is sustainable when it already lacks quarterly EPS and expects slower subscriber growth. ”

Netflix may still be the king of streaming, but it’s not a good look in the bigger picture.

The conclusion on Netflix

I’m on the fence about NFLX stocks right now.

In the past, I have been stubborn about it and quoted its success among the cord cutting movement and dive into exclusive content as promising catalysts. And for the most part, I have been right about that, with the company continuing to see great success with hit programs like Stranger Things and The Witcher and achieving criticism for some of its films (note: the ones I suggested here are not that good, critically speaking). ).

However, all this precedes the emergence of Disney + and its own breakouts such as The Mandalorian. And of course, with previous analyzes, I did not affect black swan events like the coronavirus pandemic – not many out there could have seen it coming.

Although the virus has helped to strengthen the company’s success in recent times (and thus strengthened its popularity as a stock to buy), it is much less clear how it manages to stay on top of the competition from here, especially with looming economic challenges still remaining in the corner.

Despite this uncertainty, there is still an argument as to why you can repeat the previous feeling that Netflix has “cemented” its dominance during the outbreak. For example, InvestorPlace Advisor Matt McCall believes that the inevitable slowdown in growth is “hardly a problem for Netflix. If anything, in the middle of a flowing war … [its temporary growth boost is] a big advantage. The AT&T (NYSE: T) unit WarnerMedia and Comcast (NASDAQ: CMCSA) will soon launch their own services. Meanwhile, Netflix is ​​only getting bigger. ”

Similarly, other analysts argue that while all focus on the growing domestic strength of their competitors, they fail to recognize their weakness on a global scale, compared to Netflix, which has already made significant progress in promising growth areas such as China and India.

All of this sounds good, but it still does not inspire the same kind of confidence that I had about the long-term case before. As such, I can not make a clear buy or sell recommendation on the stock right now. While there is still plenty of room for upward movement for Netflix, the mountain it must climb to achieve greater success is much more strenuous than before.

This means that it may take a little more patience to find out where its competitors really stand before its reign as king is really “cemented” in the coming years.

Robert Waldo has been the web editor of InvestorPlace since 2016. At the time of writing, he had no position in any of the above-mentioned securities.