Wall Street and Washington have been buzzing about recent reports that say the U.S. Justice Department and the Federal Trade Commission might soon investigate some of the biggest technology companies in the world. The largest firms of the so-called FAANG stocks, Facebook (FB - Free Report) , Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Google (GOOGL - Free Report) , are the companies that are said to be in the agencies’ crosshairs.
Notably left off the list is the fifth FAANG member, Netflix (NFLX - Free Report) . Therefore, it’s time to see if investors should consider buying shares of NFLX right now.
Reports began to surface late last week and over the weekend that the DOJ and the FTC are preparing to investigate some of the biggest names in tech for possible antitrust violations. According to the Wall Street Journal, the Justice Department will have authority over any possible antitrust investigation into Google parent Alphabet Inc. and Apple. Meanwhile, the FTC is set to have oversight over Facebook and Amazon. The reports also suggest that Google and Facebook possibly face more immediate investigation.
There is no clear plan at the moment and both Google and Facebook have been the target of increased scrutiny in recent years in both the U.S. and Europe. Yet, the thought behind potential probs are pretty straightforward: Google and Facebook have outsized control over the spread of information, as well as access to an incredible amount of user data.
For instance, Google is estimated to account for roughly 37% of total U.S. digital advertising spending in 2019, with FB set to grab 22%, according to eMarketer. However, Google’s share is projected to slip 1% from 2018, with Facebook up marginally. Meanwhile, third-place Amazon is projected to jump from 6.8% to 8.8%.
The cases against Amazon and Apple are also based on oversized impact or control of their various spaces. Amazon is the largest online retailer in the U.S. and Apple has come under fire for its “Apple Tax” on apps.
With all this in mind, no action against these companies has taken place yet. The firms all have massive resources to fight against whatever comes their way and it might be difficult to prove these tech giants have hurt consumers. Plus, any significant action that would impact the likes of Apple and the others in any meaningful way would likely be years away. Nonetheless, it is worth keeping an eye on this situation as a government-backed reckoning would not be fun for investors (also read: “Big Tech Threatened by Regulation:” What Else Is New?)
This also means it might be time for investors to consider buying shares of Netflix, which doesn’t seem set to see any political or regulatory interventions, based on these new reports.
NFLX Overview & Recent News
Netflix closed the first quarter of 2019 with 148.86 million paid streaming memberships. This staggering figure marked 25% growth from the year-ago period for the fifth straight quarter and helped Netflix remain the largest U.S. streaming company. Amazon boasts roughly 100 million Prime subscribers, with Disney (DIS - Free Report) -controlled Hulu at 28 million.
Netflix’s success and the overall cord-cutting revolution has sparked Disney, Apple, AT&T (T - Free Report) , and others to prepare to launch their own streaming services soon. The increased competition is sure to impact the company, but it has prepared for years for a crowded market by investing heavily in its own original content. “We continue to think that NFLX has built an unstoppable lead in subscription video streaming and the margin opportunity is expanding as it increasingly becomes content producer, distributor and retailer,” Loop Capital analysts wrote in a note to clients on Monday. The firm also upgraded NFLX from a “hold” to a “buy.”
Looking ahead, Netflix expects to grow its global paid membership base by roughly 24% in Q2 to close at 153.86 million. Meanwhile, our current Zacks Consensus Estimates call for the firm’s adjusted fiscal 2019 earnings to surge 23.5% to $3.31 per share on the back of 28% revenue growth.
Peeking further down the road, NFLX’s fiscal 2020 revenue is projected to climb 24.3% above our current-year estimate to reach $25.09 billion. And the firm’s adjusted EPS figure is expected to soar 77% higher than our 2019 projection in 2020.
Shares of NFLX are up 31% in 2019, but have moved sideways over the past three months. Netflix stock closed regular trading Tuesday up 4.98% at $353.40 per share. This still marked a 17% downturn compared to its 52-week intraday trading high of $423.21.
Netflix is Zack Rank #3 (Hold) right now that only growth-focused investors should really consider based on its sky-high valuation metrics. In the long run, the firm looks positioned to grow both its top and bottom lines in a streaming TV market that is set to expand for years to come.
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