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What's Next for Netflix (NFLX) Stock as Streaming Competition Heats Up?

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Netflix (NFLX - Free Report) is still a powerful streaming TV company, with relatively impressive growth prospects. But its days of dominance could be numbered with the release of competing platforms from Disney (DIS - Free Report) , Apple (AAPL - Free Report) , and AT&T (T - Free Report) . So, let’s see what’s next for Netflix and NFLX stock amid its continued downturn.

Overview

Netflix has seen its stock price plummet roughly 28% in the last three months. In fact, Netflix stock closed Monday at $261.43 per share, which marked a 38% downturn from its 52-week and all-time high of $423.21. Netflix is clearly not alone, with fellow giants including Facebook (FB - Free Report) , Apple, and even Amazon (AMZN - Free Report) stock all down amid the broader market selloff.

It is, however, worth noting that NFLX stock is still up over 32% in the last year and 125% in the past 24 months. The chart below helps put the recent market downturn into perspective with all of the FAANG stocks, which also includes Google (GOOGL - Free Report) , far off their recent highs.

 

 

Outlook

Netflix stock first sold off after the company reported a significant second-quarter subscriber miss. The company then followed that worrisome performance by adding a total of 7 million subscribers in Q3 to blow away its own projections by roughly 2 million.

The streaming firm ended the quarter with 137.1 million subscribers worldwide, up 25% from the year-ago period’s 109.25 million. Looking ahead, Netflix projected that it will add 7.6 million paid users and total 9.4 million subscribers in Q4, which would bring its total to 146.5 million.

Meanwhile, Netflix’s Q4 revenues are projected to climb 28% to reach $4.21 billion, based on our current Zacks Consensus Estimate. The company’s fiscal 2018 revenues are projected to reach $15.84 billion, which would mark a 35.5% surge. On the other side, Netflix is expected to see its Q4 earnings sink over 41%.

Investors should also note that Netflix’s earnings estimate revisions have trended more heavily in the wrong direction over the last 60 days. This means that, in general, some analysts are more skeptical about NFLX than they were not too long ago.

 

Competition

Netflix’s biggest rival at the moment appears to be Amazon, which last boasted that its competing Prime service had over 100 million subscribers. Yet, Amazon not only offers its own original TV shows and movies, along with other titles, users also have access to some live sports as well as the shipping deals that made the service popular in the first place.

As Disney, Apple, and AT&T join the streaming TV age within the next year or so, life will only become harder for Netflix. At a certain point, consumers will only be willing to pay for so many streaming services every month, and when you throw in the likes of Spotify (SPOT - Free Report) , the fight for consumers’ attention and wallets grows even more difficult.

Netflix did end HBO’s 17-year streak at the top of the Emmy nomination list this year, only five years after it started producing original content. And it has started to roll out more content with A-list Hollywood stars. But even if Disney and Apple don’t steal away many customers, it is unclear how much more room for subscriber growth Netflix has, especially in the U.S.

Bottom Line

Netflix stock clearly rests well below its recent highs, but so do many other tech giants. Yet it hardly seems like the best time to buy the dip since we haven’t seen any real sustained positive momentum.

Furthermore, Netflix and NFLX stock might be headed for even longer down times as the company faces serious competition.

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