Netflix & 3 More Content Stocks To Ride Global Uncertainties
Zacks Investment Research | Jun 27, 2016 11:22PM ET
Faster Internet speeds and devices like smartphones and tablets have changed the face of not only communication but also that of the broadcast and TV industry. Even the radio market has evolved substantially to keep up with the changing trends.
Traditional cable and radio providers are gradually being replaced by over-the-top content providers. Streaming video and audio (including music) services are becoming popular among the younger generation who seek instant access and instant gratification.
While we expect that the streaming companies are here to stay (yes, even with Gen Z), investing in them might be a bit tricky. Competition is rife as everyone wants a bigger share of the pie. Moreover, in the past few years, there have been a lot of new entrants in the market like Apple (NASDAQ:AAPL) , Amazon (NASDAQ:AMZN) and Pandora (NYSE:P) among others.
Global political and economic changes also have a profound impact on these companies. Dishing out content that is in tune with the latest happenings contributes significantly to viewership. Recently, the Brexit mandate - the exit of Britain from the EU - has rattled the global economy. On the other hand, the U.S. is gearing up for its presidential elections, which again will lead to a lot of changes.
But it’s important to keep in mind that even in these difficult times, there are some stocks that defy the conventional bears.
One such stock is video streaming giant Netflix (NASDAQ:NFLX) , which recorded a gain of over 129% in 2015 in contrast to a decline of 0.7% in the S&P 500 index. And mind you, 2015 was one of the most difficult years after the great recession of 2008.
So What Sets Netflix Apart?
Netflix has been smart enough to play to its strength and generate the kind of content that users demand. A rapid international expansion strategy and efforts to improve its original content have indeed been paying off.
In fact, the company is now all set to increase prices for its older customers. Netflix appears to be well poised on the growth track despite the price increase largely because its original programming manages to keep users hooked on to it. Netflix has strategically formed its own niche, catering to new-age users who want to watch as per their own convenience and sometimes prefer binge-watching.
This Zacks Rank #2 (Buy) company added 6.7 million new members in the first quarter of 2016, taking the total to over 81.5 million subscribers.
There is no doubt that Brexit will have some negative impact on the stock as the markets correct themselves, but over the long run, we believe the streaming giant will benefit from the changing trends.
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