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Netflix vs Amazon: Which Stock Is The Best Bet Amid The Current Crisis?

Netflix vs Amazon: Which Stock Is The Best Bet Amid The Current Crisis?

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3 years ago

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COVID-19 has crushed several sectors but has also created unexpected opportunities for e-commerce, gaming and video streaming companies. Netflix and Amazon, which are part of the FAANG cohort (the other three being Facebook, Apple and Google’s parent Alphabet) have gained immensely from the shelter-at-home mandates to curb the coronavirus pandemic.

Using the TipRanks’ Stock Comparison tool, we will compare these two tech behemoths to see which stock offers the most compelling investment opportunity.

Netflix (NFLX)

Netflix’s first-mover advantage helped it emerge as the market leader in streaming services. Its subscription video on demand business has grown rapidly over the years due to the quality original content that the company provides at affordable prices.  

The pandemic accelerated the shift from the traditional linear TV to the streaming platform. As per a report by Media Play News, the US streaming video consumption has more than doubled since the pandemic based on data from 7Park. Subscription video on demand usage increased to almost 600 minutes per month since mid-March compared to less than 300 minutes in June 2019. It crossed 700 minutes in April but came down to the mid-600 range in May and June. 

Netflix gained 15.8 million subscribers in the first quarter and 10.1 million in the second quarter due to pandemic-led demand. This growth compares with 28 million additions in the entire 2019. However, the company cautioned that the growth in paid memberships is slowing.

Netflix’s prediction of 2.5 million subscriber additions in the third quarter reflected a sequential slow down as well as a year-over-year decline compared to 6.8 million in 2019’s third quarter.

There are concerns about Netflix reaching saturation in the US market. However, Bernstein analyst Todd Juenger believes that an aging population offers a long-term user growth opportunity. The analyst noted that the 5.7 million subscription additions in the US and Canada in the first half was “largely fueled by older age cohorts.”

He also believes that as Netflix’s younger users age, they would carry forward their higher penetration rates and this trend could mean 23 million subscribers over the next 15 years. Bernstein has a Buy rating for Netflix with a price target of $573. (See NFLX stock analysis on TipRanks)

Rising competition in the streaming space from Amazon Prime Video, Disney+, Apple TV Plus, Hulu and HBO Max is also a major headwind. Disney Plus, which was launched in November 2019, has built a subscriber base of over 60.5 million subscribers in just 8 months.   

Meanwhile, Netflix is focusing on expanding its international presence. The company has 193 million paid members across 190 countries, including 70 million in US and Canada. In the first half of 2020, Netflix’s subscribers grew about 10% Y/Y in the US and Canada while the growth was about 39% in Europe, the Middle East, and Africa, 74% in Asia Pacific, and 29% in Latin America.   

The Street has a Moderate Buy consensus for Netflix that breaks down into 21 Buys, 10 Holds and 5 Sells. An average price target of $519.43 indicates an upside potential of 4.32% over the next 12-months. The stock has risen 54% so far in 2020.  

Amazon (AMZN)

Amazon was already an undisputed leader in the e-commerce space. But COVID-19 has further bolstered the company’s position as more customers are shopping online and avoiding visiting physical stores.   

The e-commerce giant posted revenue of $88.9 billion in the second quarter, reflecting a Y/Y increase of 40.2%. Online grocery sales tripled while revenue from the company’s cloud computing unit Amazon Web Services surged 29% supported by a rise in remote work and online education.

Amazon’s subscription services revenue, which includes fees from Amazon Prime memberships as well as other services like digital video and music, also grew 29%. Despite over $4 billion in COVID-related costs, the company’s second-quarter EPS grew 97% Y/Y to $10.30.

After establishing its dominance in e-commerce and cloud computing, the company is building its position in streaming services. Amazon’s worldwide streaming video hours doubled Y/Y in Q2 primarily due to Prime Video.

Emphasizing the strength of Amazon Prime Video, Needham analyst Laura Martin states, “Today, Amazon Prime Video is number 2 to Netflix, with about 150mm global Prime subscribers who get Amazon Prime Video for free in the bundle.”

Citing reports by The Diffusion Group, she highlights that 80% of subscribers paid for Prime for free shipping while 20% joined Prime to access other services such as Prime Video, Twitch and music. These other services help Prime Video gain new subscribers and lower the churn rate.

The analyst estimates that Amazon Prime Video’s revenue will grow to $4.1 billion in 2020, up from $3.57 billion in 2019. The five-star analyst has a Buy rating for Amazon with a price target of $3,700. (See AMZN stock analysis on TipRanks)

Amazon stock has already advanced 78% year-to-date and the average price target of $3725.59 indicates further upside potential of about 13%. Barring one analyst with Hold rating, Amazon boasts 38 Buys ratings from the Street, thus adding up to a Strong Buy consensus.

The bottom line

Netflix is the king in the streaming space while Amazon has a diversified business model with leading positions in several growth areas- including cloud and e-commerce. Also, the Street consensus and upside potential in the stock make Amazon a better pick than Netflix right now despite the fact that shares have already rallied 78% year-to-date.

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment

The post Netflix vs Amazon: Which Stock Is The Best Bet Amid The Current Crisis? appeared first on TipRanks Financial Blog.

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Fighting the Surveillance State Begins with the Individual

It’s a well-known fact at this point that in the United States and most of the so-called free countries that there is a robust surveillance state in…

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19 hours ago

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October 23, 2023

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It’s a well-known fact at this point that in the United States and most of the so-called free countries that there is a robust surveillance state in place, collecting data on the entire populace. This has been proven beyond a shadow of a doubt by people like Edward Snowden, a National Security Agency (NSA) whistleblower who exposed that the NSA was conducting mass surveillance on US citizens and the world as a whole. The NSA used applications like those from Prism Systems to piggyback on corporations and the data collection their users had agreed to in the terms of service. Google would scan all emails sent to a Gmail address to use for personalized advertising. The government then went to these companies and demanded the data, and this is what makes the surveillance state so interesting. Neo-Marxists like Shoshana Zuboff have dubbed this “surveillance capitalism.” In China, the mass surveillance is conducted at a loss. Setting up closed-circuit television cameras and hiring government workers to be a mandatory editorial staff for blogs and social media can get quite expensive. But if you parasitically leech off a profitable business practice it means that the surveillance state will turn a profit, which is a great asset and an even greater weakness for the system. You see, when that is what your surveillance state is predicated on you’ve effectively given your subjects an opt-out button. They stop using services that spy on them. There is software and online services that are called “open source,” which refers to software whose code is publicly available and can be viewed by anyone so that you can see exactly what that software does. The opposite of this, and what you’re likely already familiar with, is proprietary software. Open-source software generally markets itself as privacy respecting and doesn’t participate in data collection. Services like that can really undo the tricky situation we’ve found ourselves in. It’s a simple fact of life that when the government is given a power—whether that be to regulate, surveil, tax, or plunder—it is nigh impossible to wrestle it away from the state outside somehow disposing of the state entirely. This is why the issue of undoing mass surveillance is of the utmost importance. If the government has the power to spy on its populace, it will. There are people, like the creators of The Social Dilemma, who think that the solution to these privacy invasions isn’t less government but more government, arguing that data collection should be taxed to dissuade the practice or that regulation needs to be put into place to actively prevent abuses. This is silly to anyone who understands the effect regulations have and how the internet really works. You see, data collection is necessary. You can’t have email without some elements of data collection because it’s simply how the protocol functions. The issue is how that data is stored and used. A tax on data collection itself will simply become another cost of doing business. A large company like Google can afford to pay a tax. But a company like Proton Mail, a smaller, more privacy-respecting business, likely couldn’t. Proton Mail’s business model is based on paid subscriptions. If there were additional taxes imposed on them, it’s possible that they would not be able to afford the cost and would be forced out of the market. To reiterate, if one really cares about the destruction of the surveillance state, the first step is to personally make changes to how you interact with online services and to whom you choose to give your data.

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Stock Market Today: Stocks turn higher as Treasury yields retreat; big tech earnings up next

A pullback in Treasury yields has stocks moving higher Monday heading into a busy earnings week and a key 2-year bond auction later on Tuesday.

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19 hours ago

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October 23, 2023

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Updated at 11:52 am EDT U.S. stocks turned higher Monday, heading into the busiest earnings week of the year on Wall Street, amid a pullback in Treasury bond yields that followed the first breach of 5% for 10-year notes since 2007. Investors, however, continue to track developments in Israel's war with Hamas, which launched its deadly attack from Gaza three weeks ago, as leaders around the region, and the wider world, work to contain the fighting and broker at least a form of cease-fire. Humanitarian aid is also making its way into Gaza, through the territory's border with Egypt, as officials continue to work for the release of more than 200 Israelis taken hostage by Hamas during the October 7 attack. Those diplomatic efforts eased some of the market's concern in overnight trading, but the lingering risk that regional adversaries such as Iran, or even Saudi Arabia, could be drawn into the conflict continues to blunt risk appetite. Still, the U.S. dollar index, which tracks the greenback against a basket of six global currencies and acts as the safe-haven benchmark in times of market turmoil, fell 0.37% in early New York trading 105.773, suggesting some modest moves into riskier assets. The Japanese yen, however, eased past the 150 mark in overnight dealing, a level that has some traders awaiting intervention from the Bank of Japan and which may have triggered small amounts of dollar sales and yen purchases. In the bond market, benchmark 10-year note yields breached the 5% mark in overnight trading, after briefly surpassing that level late last week for the first time since 2007, but were last seen trading at 4.867% ahead of $141 billion in 2-year, 5-year and 7-year note auctions later this week. Global oil prices were also lower, following two consecutive weekly gains that has take Brent crude, the global pricing benchmark, firmly past $90 a barrel amid supply disruption concerns tied to the middle east conflict. Brent contracts for December delivery were last seen $1.06 lower on the session at $91.07 per barrel while WTI futures contract for the same month fell $1.36 to $86.72 per barrel. Market volatility gauges were also active, with the CBOE Group's VIX index hitting a fresh seven-month high of $23.08 before easing to $20.18 later in the session. That level suggests traders are expecting ranges on the S&P 500 of around 1.26%, or 53 points, over the next month. A busy earnings week also indicates the likelihood of elevated trading volatility, with 158 S&P 500 companies reporting third quarter earnings over the next five days, including mega cap tech names such as Google parent Alphabet  (GOOGL) - Get Free Report, Microsoft  (MSFT) - Get Free Report, retail and cloud computing giant Amazon  (AMZN) - Get Free Report and Facebook owner Meta Platforms  (META) - Get Free Report. "It’s shaping up to be a big week for the market and it comes as the S&P 500 is testing a key level—the four-month low it set earlier this month," said Chris Larkin, managing director for trading and investing at E*TRADE from Morgan Stanley. "How the market responds to that test may hinge on sentiment, which often plays a larger-than-average role around this time of year," he added. "And right now, concerns about rising interest rates and geopolitical turmoil have the potential to exacerbate the market’s swings." Heading into the middle of the trading day on Wall Street, the S&P 500, which is down 8% from its early July peak, the highest of the year, was up 10 points, or 0.25%. The Dow Jones Industrial Average, which slumped into negative territory for the year last week, was marked 10 points lower while the Nasdaq, which fell 4.31% last week, was up 66 points, or 0.51%. In overseas markets, Europe's Stoxx 600 was marked 0.11% lower by the close of Frankfurt trading, with markets largely tracking U.S. stocks as well as the broader conflict in Israel. In Asia, a  slump in China stocks took the benchmark CSI 300 to a fresh 2019 low and pulled the region-wide MSCI ex-Japan 0.72% lower into the close of trading.
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iPhone Maker Foxconn Investigated By Chinese Authorities

Foxconn, the Taiwanese company that manufactures iPhones on behalf of Apple (AAPL), is being investigated by Chinese authorities, according to multiple…

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21 hours ago

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October 23, 2023

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Foxconn, the Taiwanese company that manufactures iPhones on behalf of Apple (AAPL), is being investigated by Chinese authorities, according to multiple media reports. Foxconn’s business has been searched by Chinese authorities and China’s main tax authority has conducted inspections of Foxconn’s manufacturing operations in the Chinese provinces of Guangdong and Jiangsu. At the same time, China’s natural-resources department has begun onsite investigations into Foxconn’s land use in Henan and Hubei provinces within China. Foxconn has manufacturing facilities focused on Apple products in three of the Chinese provinces where authorities are carrying out searches. While headquartered in Taiwan, Foxconn has a huge manufacturing presence in China and is a large employer in the nation of 1.4 billion people. The investigations suggest that China is ramping up pressure on the company as Foxconn considers major investments in India, and as presidential elections approach in Taiwan. Foxconn founder Terry Gou said in August of this year that he intends to run for the Taiwanese presidency. He has resigned from the company’s board of directors but continues to hold a 12.5% stake in the company. Gou is currently in fourth place in the polls ahead of the election that is scheduled to be held in January 2024. The potential impact on Apple and its iPhone manufacturing comes amid rising political tensions between politicians in Washington, D.C. and Beijing. Apple’s stock has risen 16% over the last 12 months and currently trades at $172.88 U.S. per share.  

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