Netflix Is Ideal Stock for Coronavirus Fears
Events are being cancelled around the world as fears of the dreaded coronavirus takes hold. NBA games have been suspended. March Madness will happen, but with no fans. There have been cancellations of major business events. You get the message. Many countries are closing up shop for now, and this could only benefit companies like Netflix Inc (NASDAQ:NFLX).
We’re seeing self-hibernation and many companies telling workers to work remotely from home. All of this will likely mean an uptick for steaming services like Netflix.
While the coronavirus is really serious, people still need to be entertained. They likely won’t be venturing out to the movies, instead staying indoors and watching movies and shows online.
Netflix stock should benefit from the shift indoors. Trading about 15% off its record high of $393.52, NFLX stock has actually performed fairly well versus the Nasdaq and S&P 500.
Why Disney Threat Is Not Impactful for Netflix Stock
In 2019, Netflix Inc faced some selling pressure after Walt Disney Co (NYSE:DIS) announced its rival streaming service.
While it was a threat, Disney and Netflix are vastly different in terms of focus and content. “Disney+” aims its content toward kids while Netflix has a more broad-based, global viewership.
Disney+ has a long way to go to match Netflix. The massive difference in subscribers supports a bull case for NFLX stock. Netflix had more than 167 million subscribers at the end of 2019, compared to just over 10 million for Disney at the time.
Netflix has more than doubled its subscriber base since 2015. The compound annual growth rate (CAGR) was 24% in the period.
|Year||Netflix Subscribers (Millions)|
(Source: “Number of Netflix paying streaming subscribers worldwide from 3rd quarter 2011 to 4th quarter 2019,” Statista, last accessed March 12, 2020.)
Moreover, Netflix Inc is a pure play in the streaming segment while Walt Disney Co relies heavily on its theme parks and merchandising.
NFLX Stock Chart Indicates Potential Opportunities
Netflix stock has been largely drifting in a sideways channel since its breakout from the previous $200.00 level in March 2018.
NFLX stock broke above $300.00, where the stock has largely held for two years—with the exception of two breakdowns in December 2018 and October 2019.
Chart courtesy of StockCharts.com
The coronavirus outbreak, while beneficial to Netflix on the surface, could still place pressure on Netflix stock.
If NFLX stock fails to hold $300.00, watch for a move down to $285.00, followed by key support levels at $240.00 to $260.00. Investors could view these support levels as opportunities.
Netflix Inc should reap the rewards from an escalation of the spread of the coronavirus, with more people staying home and wanting to be entertained.
Netflix stock has long been the best of breed in the streaming market, and I expect this to continue.