The FAANG team of mega cap stocks developed hefty returns for investors throughout 2020. The group, whose members consist of Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) benefited greatly from the COVID 19 pandemic as people sheltering in position used their products to shop, work as well as entertain online.

Of the previous 12 months alone, Facebook gained 35 %, Amazon rose 78 %, Apple was up 86 %, Netflix discovered a 61 % boost, as well as Google’s parent Alphabet is actually up thirty two %. As we enter 2021, investors are actually wondering if these tech titans, enhanced for lockdown commerce, will provide very similar or even much more effectively upside this season.

By this number of 5 stocks, we are analyzing Netflix today – a high performer throughout the pandemic, it is today facing a distinctive competitive threat.

Stay-at-Home Appeal Diminishing?
Netflix has been one of the strongest equity performers of 2020. The company and the stock benefited from the stay-at-home atmosphere, spurring need because of its streaming service. The stock surged about 90 % from the reduced it hit on March 16, until mid October.

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However, during the past three months, that rally has run out of steam, as the company’s key rival Disney (NYSE:DIS) gained considerable ground in the streaming battle.

Within a year of the launch of its, the DIS’s streaming service, Disney+, today has more than eighty million paid subscribers. That’s a significant jump from the 57.5 million it found to the summer quarter. That compares with Netflix’s 195 million subscribers as of September.

These successes by Disney+ arrived at exactly the same time Netflix has been reporting a slowdown in the subscriber development of its. Netflix in October found it added 2.2 million members in the third quarter on a net basis, light of its forecast in July of 2.5 million new subscriptions for the period.

But Disney+ isn’t the sole headache for Netflix. AT&T’s (NYSE:T) WarnerMedia division is within the midst of a comparable restructuring as it concentrates on the latest HBO Max of its streaming platform. Also, Comcast’s (NASDAQ:CMCSA) NBCUniversal is realigning its entertainment operations to give priority to its new Peacock streaming service.

Negative Cash Flows
Apart from growing competition, the thing that makes Netflix much more weak among the FAANG group is the company’s tight money position. Given that the service spends a lot to develop the extraordinary shows of its and capture international markets, it burns a lot of money each quarter.

To enhance the money position of its, Netflix raised prices for its most popular program during the very last quarter, the next time the company has done so in as many years. The action might prove counterproductive in an environment in which men and women are losing jobs and competition is warming up. In the past, Netflix priced hikes have led to a slowdown in subscriber growth, especially in the more-mature U.S. market.

Benchmark analyst Matthew Harrigan last week raised similar issues in his note, warning that subscriber development could possibly slow in 2021:

“Netflix’s trading correlation with various other prominent NASDAQ 100  and FAAMG names has now obviously broken down as 1) belief in the streaming exceptionalism of its is actually fading somewhat even as two) the stay-at-home trade could be “very 2020″ despite having some concern over just how U.K. and South African virus mutations might affect Covid 19 vaccine efficacy.”

The 12 month cost target of his for Netflix stock is actually $412, about twenty % below its current level.

Bottom Line

Netflix’s stay-at-home appeal made it both one of the greatest mega caps and tech stocks in 2020. But as the competition heats up, the company must show it is the top streaming option, and it’s well positioned to protect the turf of its.

Investors seem to be taking a break from Netflix stock as they hold out to determine if that could occur.