Netflix (NASDAQ:NFLX) has somewhat quietly outperformed all of its FAANG peers amid the novel coronavirus-driven selloff. NFLX stock is actually up 22.6% so far in 2020.
The next closest competitor from the group is Amazon (NASDAQ:AMZN), which is up 17.4%. The rest, which includes Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) are down between 5% and 15% for the year.
This comes without much surprise, but Netflix is down the least from its highs, too. From its 52-week high, NFLX stock is down less than 1%. This thing has simply been a juggernaut lately.
Why Is NFLX Stock Doing So Well?
The answer to the question above is simple: Lockdown, shelter-in-place orders and quarantine. What else is the public to do when they can’t be in public? Stream video.
And for streaming there’s Disney’s (NYSE:DIS) Disney+ or Hulu, Amazon Prime, AT&T’s (NYSE:T) HBO, and Netflix. Most people are likely using a combination of platforms.
Netflix and others have already had to curb streaming quality in various parts of the world to avoid putting too much stress on the internet. With the coronavirus impacting the entire world, it’s safe to say that Netflix is set to have a strong couple of quarters, both domestically and internationally.
We’re seeing interest in Roku (NASDAQ:ROKU) and other streaming options increase. But from a content perspective, there’s little doubt about who the king of streaming is, and that’s NFLX stock.
Of course with millions stuck at home, many will be streaming and binging Netflix. That much is obvious. Here’s my theory though — which goes a step further than Covid-19 — there’s also going to be a recession and Netflix is a perfect recession play.
We hope the duration is short, but nothing is off the table in the current environment. Consumers who have everything — security, consistent income, etc. — aren’t going to cancel their Netflix subscription. They have no reason to. Those without money are unlikely to cancel either. Put simply, Netflix gives streaming customers the most bang for their buck, which is going to be attractive for customers in good times or bad, in lockdown or out.
Thematic Trends Accelerate
Streaming video is not a trend that started because of the coronavirus. It’s a trend that’s been in place for years now and will only gain traction due to the virus.
Customers are dropping their subscriptions to linear TV and increasingly looking at streaming options.
Just a few years ago, one streaming service was enough for most. Something like a Netflix or Hulu likely paired with a traditional TV service. Now though — particularly as there are options like YouTube TV or Hulu TV — customers quickly emphasize that more than one streaming service is needed.
Finally, while this study is a bit older (from the second half of 2018), it still emphasizes a key point. Netflix was deemed the most essential video service among those polled. That’s over other options like Amazon Prime, cable TV and even free YouTube videos (which came in at No. 2).
The point is, streaming video has been a trend for several years now. It’s been hitting a tipping point over the last few years as consumers opt for various streaming services to replace traditional TV. Covid-19 will only accelerate that trend. Regardless of whether we get a short or prolonged recession, Netflix’s business should be okay even if NFLX stock takes a hit.
It has the right price point for consumers, wealthy or not, and doesn’t face falling revenue as digital ad spending declines. That will only bode well for the company when times are good again.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
