Netflix (NASDAQ:NFLX) continues to face increased competition, and that’s putting downward pressure on NFLX stock.
On Sept. 10, Apple (NASDAQ:AAPL) announced the price of Apple TV Plus, the company’s streaming platform. Set to launch on Nov. 1, it will cost the bargain-basement price of $4.99 a month.
That’s significantly cheaper than both Netflix at $12.99 a month (its most popular plan) and Disney+ at $6.99 per month. And, if you buy a new Apple device, you’ll get Apple TV Plus free for the next year.
Of course, Apple’s new streaming service won’t have nearly as much content as its peers, but it does plan to add more over time.
Owners of NFLX stock have been nervous since it announced weak Q2 2019 results in July that showed a loss in U.S. subscribers and a failure to add as many international subscribers as analysts expected.
Now, with Disney (NYSE:DIS), Apple, HBO, NBCUniversal and many others bringing out their streaming services, investors are wondering if the best days for Netflix stock are behind it.
“Investor interest in Netflix is at a nadir with a view the stock will not work given these competitive launches the next few quarters,” said Credit Suisse research analyst Douglas Mitchelson in a note to clients Sept. 9. “This suggests that for Netflix shares to rebound, 3Q19 results would have to come in well ahead of expectations.”
Maybe they will. Perhaps they won’t.
If you’re unsure, but generally like Netflix’s business model, you might want to buy these three ETFs as a safer alternative to NFLX stock.
Invesco NASDAQ Internet ETF (PNQI)
The first ETF to buy I’ve based on Netflix’s weighting within the portfolio. The higher, the better.
The Invesco NASDAQ Internet ETF (NASDAQ:PNQI) tracks the performance of the NASDAQ Internet Index, which invests in the largest and most liquid U.S.-listed internet-related companies.
NFLX is the fifth-largest holding of the $539 million fund with a weighting of 6.27%. Also included in the top 10 holdings is Amazon (NASDAQ:AMZN), whose Prime video streaming service competes with Netflix for eyeballs.
Overall, PNQI has 83 holdings, charges 0.60% (or $60 annually per $10,000 investment), and it has delivered a three-year, annualized total return of 16.7%.
Fidelity MSCI Communication Services Index ETF (FCOM)
The second ETF to buy I’ve based on the management expense ratio. The lower, the better.
The Fidelity MSCI Communication Services Index ETF (NYSEARCA:FCOM) tracks the performance of the MSCI USA IMI Communication Services 25/50 Index, which invests in U.S. communication services stocks.
NFLX is the eighth-largest holding of the $445-million fund with a weighting of 4.18%. Also included in the top 10 holdings are several of its competitors, including AT&T (NYSE:T) at 4.70% and Disney at 7.16%.
Overall, FCOM has 110 holdings, charges 0.08% annually and it has delivered a three-year, annualized total return of 8.9%.
ERShares Entrepreneur 30 ETF (ENTR)
The third ETF to buy I’ve based on the number of holdings. The fewer, the better.
The ERShares Entrepreneur 30 ETF (NYSEARCA:ENTR) tracks the performance of the ER30 Index, which invests in 30 of the largest U.S. large-cap entrepreneurial companies.
NFLX is the sixth-largest holding of the $74-million fund with a weighting of 4.20%. Amazon is also one of the ETF’s top 10 holdings.
Overall, ENTR has 30 holdings, charges 0.49% annually and year-to-date has delivered a total return of 21.9%. It does not have a three-year return because it was only launched in November 2017.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
