All eyes are on video-streaming giant Netflix, which faces new competition from Disney’s highly anticipated streaming platform,Disney+, as it reported its first-quarter earnings Tuesday.
Its stock fell more than 1% in after-hours trading, after closing with a share price around $360.
Still, investing in early 2007, when Netflix first began streaming, would have proved to be a good bet. A $1,000 investment made on Jan. 15, 2007, would be worth more than $110,000 as of midday April 16, 2019, according to CNBC calculations, fora total return of about 10,000%. Over the same period, the S&P 500 was up just over 100%.
While the company’s stock took a slight dip after hours Tuesday, following its earnings release, it reported quarterly revenue that beat estimates and shares are up more than 34 percent as of Tuesday’s close.
Many investors relayed optimistic messages early this week. In a note, analysts at banking firm KeyBanc seemed skeptical that new streaming competition could pose a significant threat.
CNBC: Netflix stock as of April 16, 2019
“While other services may carve out valuable add-on positions, we do not expect the launch of new services from Apple, Disney, AT&T, or others to meaningfully impact Netflix,” they said. “We continue to view Netflix’s strategic positioning very favorably.”
Investment banking company Deutsche Bank raised its rating on Netflix shares from “hold” to “buy” early Tuesday, saying the service is becoming more like a “platform” every day.
“Platform status brings network effects not available to peers and competitors,” analyst Bryan Kraft wrote in a note. “Specifically, this is making Netflix even more of a go-to destination when consumers want to watch something, and it means having Netflix is becoming more of a cultural necessity for people around the world. It also makes Netflix a magnet for talent. ”
That means “consumers stay captive within the Netflix walled garden for significant amounts of time,” Kraft added. “Aside from pay TV, which is losing audience share, there are no other competing platforms that approach Netflix’s reach.”
Netflix had a whopping 148 million total subscribers as of February, and some analysts predict that number will grow to 335 million by 2028. By comparison, Disney+, which will officially start streaming mid-November, expects to reach 60 million to 90 million subscribers by 2024.
While Netflix’s stock has shot up recently and has mostly done well over the years, though, any individual stock can over- or underperform and past returns do not predict future results.
Not everyone is sanguine about the company’s prospects. While many believe Netflix’s platform won’t see major disruption thanks to Disney+, shares fell a little more than 1% following Disney’s announcement.
The “action obviously has nothing to do with anything other than a big competitor joining the ring, but what’s important here about Netflix is how poorly it’s been acting over the past one, two, three months and more,” analyst Carter Worth said on CNBC’s “Options Action.”
Worth, chief market technician at market research company Cornerstone Macro, acknowledged that Netflix’s stock is “one of the great winners of all time,” but added, “I think it’s risky to go into earnings long, at least full long. I’d reduce or buy puts or some other strategy to protect oneself.”
Disney+ will also be more affordable to consumers than Netflix, which recently raised its prices. Disney+ will start at $6.99 a month or around $70 a year for popular content such as the “Star Wars” franchise, as well as the original content it is spending heavily to produce. Netflix, which aimed to spend up to $8 billion on content last year — including on original content — is priced at $13 per month for its standard plan.
Netflix also faces competition from streaming services by Amazon and Apple. However, some analysts at bank-holding company SunTrust say more streaming options could be a positive, causing consumers to “accelerate cord-cutting” and focus on their favorites.
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This article was first published by CNBC https://www.cnbc.com/2019/04/16/what-a-1000-dollar-investment-in-netflix-in-2007-would-be-worth-now.html and is republished with its permission.
