Why Netflix Stock Will Still Be Relevant Post-Pandemic

Back when the novel coronavirus pandemic was at its ugliest in terms of societal and economic impact, most industries looked bleak. With American households hunkering down against an unknown microbiological threat, doom-and-gloom prognostications took on much greater credibility. However, streaming company Netflix (NASDAQ:NFLX) was one of the few obvious winners. After all, when sitting at home was considered a government mandate, Netflix stock really had no other direction to go but up.

Picture of a person laying on a couch holding a mobile phone that features the Netflix (NFLX) logo on the screen
Source: Alex Ruhl / Shutterstock.com

Overall, the complete shutdown of sports and other live events meant that the already hurting linear TV business model was suddenly on life support. And though streaming services have myriad benefits, including on-demand consumption of desired content, where they often lack is in live broadcasts. Thus, cable and satellite TV subscribers were able to feed the ravenous demand from sports fanatics as well as bars and restaurants hosting major events.

Of course, with the pandemic ripping up the college and professional sports schedule — along with the restaurant and bar industries temporarily closing their doors — linear TV lost their relevance. In addition, individual TV subscribers didn’t want to pay the onerous costs of cable/satellite services.

Sure, many of the teaser rates are enticing. But once the promo runs out, subscribers often find themselves looking at monthly bills approaching $100 or even more. Obviously, this just didn’t make sense given the uncertainty of the pandemic. However, with many streaming services offering low double-digit bills, it made sense why Netflix stock benefitted tremendously during this crisis.

Now that people are getting used to the new normal, though, will this bullish narrative change? Anything is possible, but I highly doubt it. When you’re receiving great entertainment for such a low price, consumers will be hesitant to give that up. Therefore, I don’t see the positive enthusiasm for Netflix stock changing anytime soon.

Besides, what else is the alternative? Yes, consumers can go back to linear for sports content. But with the tremendous amount of money that they’re saving through streaming services, the present economy just doesn’t incentivize the linear platform.

Netflix Stock Is Sitting on an Enviable, All-Win Situation

Moreover, it’s important to note that Netflix stock has been a consistent winner throughout this crisis. On a year-to-date basis, shares are up nearly 62%. In contrast, the benchmark S&P 500 index is up less than 7% at time of writing.

NFLX stock vs. S&P 500 index YTD performance
Click to Enlarge
Source: Chart by Matt McCall Research Team

More than likely, NFLX stock will continue to reward patient investors who have a multi-year time horizon. That’s because no matter what happens next with the pandemic, shares are poised to benefit.

On one end, it’s very possible that Covid-19 cases could accelerate. Data from the Centers for Disease Control and Prevention demonstrates that new daily infections have been steadily rising since early September. As well, a recent CNBC report noted that worldwide coronavirus cases hit 40 million. Amid this backdrop, Europe is suffering from a second wave.

Obviously, the wearing of masks and other social distancing measures have aroused controversy in the U.S. Furthermore, with Americans getting tired of being cooped up at home, it’s well within possibility that cases could accelerate. In turn, this could force state governments to again initiate some form of lockdown. If so, we could see a return to the original pandemic narrative for Netflix stock.

Nonetheless, let’s assume that coronavirus cases decline for whatever reason and we end up avoiding a second wave. In this hypothetical example, Netflix stock should still enjoy upside catalysts. Essentially, the coronavirus at the beginning of this crisis imposed a marketing campaign on the entire country. By rendering linear TV obsolete and instead advertising a superior alternative, consumers had no choice but to take the offer seriously.

As you know, humans are creatures of habit. Therefore, anything less than a paradigm shift was probably not going to convince older U.S. adults to give up their cable or satellite TV subscriptions. Well, the coronavirus was that paradigm shift.

Plus, with streaming services being cheaper because they facilitate piecemeal content consumption, linear TV looks more awful than it ever has, especially during this economic crisis.

Even the Third Option Helps NFLX Stock

Finally, there is one other road regarding the pandemic. Although we may get hit with a resurgence of cases, we might avoid the most severe of forecasted scenarios. In this case — you can call it the third option — we would have dodged a bullet in terms of the human toll.

However, high-contact businesses will probably suffer from demand loss in this scenario. And that would also limit alternative entertainment options, such as movie theaters. Again, all roads lead to Netflix, which means you can buy NFLX stock with confidence.

On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.

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