Netflix, Inc.: Here’s Why NFLX Stock Is Doomed to Even More Pain in 2016

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nflx stock - Netflix, Inc.: Here’s Why NFLX Stock Is Doomed to Even More Pain in 2016

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Netflix, Inc. (NASDAQ:NFLX) has had a rough go lately, with NFLX stock down 21% year-to-date and down about 30% from its 52-week high.

Netflix, Inc.: Here's Why NFLX Stock Is Doomed to Even More Pain in 2016

As I wrote in July after ugly Netflix earnings, NFLX stock is in big trouble as subscriber growth slows and overseas pressure mounts. These risks have been known to investors, but they have become particularly acute recently — starting with a nasty Q1 report in April, and reinforced by the most recent numbers a few weeks back.

If you’re a NFLX stock holder who has been riding this pick long-term, you may be inclined to ignore the short-term downtrend. After all, Netflix Inc. was literally the best stock in the S&P 500 in 2015 with a 130% return — topping other big names including Amazon.com, Inc. (NASDAQ:AMZN) and its roughly 120% gain on the calendar year.

But now, AMZN and other competitors are coming to eat Netflix’s lunch — and chief among them is rival Hulu, which just teamed up with Time Warner Inc (NYSE:TWX).

NFLX Stock Will Lose to Hulu

Media giant Time Warner Inc just bought a 10% stake in streaming video service Hulu, giving it a clear path into the streaming age beyond cable.

However, it’s important to note this isn’t just a hedge. Time Warner Inc is actually the parent of HBO and its successful HBO Go streaming service — which makes one wonder whether HBO content will start appearing on Hulu in earnest, or whether the two distribution arms could eventually merge.

Furthermore, if content is king, then TWX still has a lot to offer both customers and Hulu in a deeper partnership — including Warner Bros. films, TBS sitcoms and even live-streamed news from CNN.

Netflix has what, House of Cards and Orange is the New Black? Can it really compete with this deep bench?

It’s worth pointing out Hulu has long been a collaboration and not an independent vision like NFLX. Walt Disney Co (NYSE:DIS) began as an early partner in Hulu with a substantial ownership stake, in addition to a content relationship, as did Twenty-First Century Fox Inc (NASDAQ:FOX) and Comcast Corporation (NASDAQ:CMCSA) through its NBC-Universal brand. Rolling up the Turner network of channels as well other Time Warner assets could be a big shot in the arm to an already robust platform.

And at the end of the day, even if Hulu isn’t the champion, then it will continue to erode shares — as will Amazon Prime Instant Video and emerging player Sling TV from Dish Network Corp (NASDAQ:DISH). That’s to say nothing of content platforms built in to Apple Inc (NASDAQ:AAPL) hardware that allows for easy download, or YouTube efforts from Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL).

The bottom line is that Netflix may be outgunned in the long-term, and is certainly suffering a big anchor of negative sentiment in the short-term. After all, with a forward P/E of about 100, there’s not a lot of room for error.

Sadly, NFLX stock will likely keep producing disappointing headlines and financial results given all this competition. That means now may be the time to stop riding the Netflix train and look for an alternative.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.

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