Why Netflix May Become A Safe Haven As Techs Plunge On Trade War

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Why Netflix May Become A Safe Haven As Techs Plunge On Trade War

Netflix Inc. (NFLX), which has limited exposure to China, may perform better than many tech firms in the U.S.-China trade war and turn out to be a surprise safe haven. One reason is that the on-demand streaming juggernaut is expanding quickly in nations outside of China, notably India, the second-most populous country in the world. The stock is now being cushioned by this, and if the trade war grinds on, it can become even more appealing.

The majority of its fellow FAANG member firms and the main indices have both outperformed Netflix this year, which is still up 32%. According to Barron’s, investors seem to still prefer tech, but not hardware tech businesses, which is one reason why they haven’t fully given up on tech stocks even if they have piled into defense, utilities, real estate, and staples despite the trade concerns. Because of this, Apple (AAPL) and the chip stocks (SOXX), particularly Broadcom Inc., have drastically declined, as have other hardware firms vulnerable to China, such as Netflix (AVGO).

Netflix Vs. Hardware Stocks

(% Fall From 2019 highs)

  • Netflix -9%
  • Apple -15%
  • Broadcom -18%
  • Chip Stocks – 17%

Source: Investopedia

Rapid Global Growth

Of course, there are other reasons why Netflix’s stock has declined this spring besides trade issues. With Apple unveiling its own subscription service earlier this year and other well-funded corporations like Walt Disney Co. (DIS) and Amazon.com Inc. (AMZN) adding content, the company is facing the possibility of fierce competition in the streaming market.

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But compared to competitors, Netflix may be better positioned for worldwide expansion. Netflix’s material produced in other countries is helping to increase viewership both internationally and in the United States, according to Imperial Capital analyst David Miller, who rates Netflix stock as outperform. In many situations, the opposite of that is beginning to take root, according to Miller. “Too many media investors conceive of Netflix’s worldwide business as just U.S. material that is dubbed in multiple other languages,” he wrote. This indicates that although Netflix stock has short-term defensive appeal, it also promises growth. Miller projects a gain for Netflix of around 32%, or $463.

Asia Viewers

With more than 1.3 billion inhabitants, India is the second-most populous country in the world, four times the size of the United States and not far behind No. 1 China. Netflix is also making progress in India. According to Marketwatch, Netflix offers 20 locally produced original movies and 12 locally produced original TV shows available in India.

Looking Ahead

The streaming behemoth is apparently moving up to fifth position in Japan and “appears on pace to continue climbing,” according to RBC Capital Markets analyst Mark Mahaney, who spoke to MarketWatch. His Netflix price objective is $480, up 37% from the current price.

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