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Netflix Shrugging Off The New Competition - It Has Further Upside

Feb. 04, 2019 7:15 AM ETNetflix, Inc. (NFLX)AMZN, DIS, T, VOD82 Comments
Arturo Neto, CFA profile picture
Arturo Neto, CFA


  • The competitive landscape for streaming is about to change dramatically with Disney and AT&T becoming players.
  • Netflix's early shift to original content was a wise move that will give it a leg up on the competition for some time.
  • While valuation seems high, we believe earnings growth will drive the price even as the multiple contracts modestly. We see at least 15% upside and are conservative in our estimate.
  • Looking for more? I update all of my investing ideas and strategies to members of REITs, Opportunities & Income . Start your free trial today »

The video streaming industry can easily be described as a crowded space with established incumbents such as Netflix (NASDAQ:NFLX), Amazon (AMZN) Video, Hulu, and YouTube being challenged by infiltrators like AT&T (T) and Disney (DIS). The competitive landscape seemed to be quite predictable with just the incumbents, and sure the dynamics of the industry have evolved. But when two big players make major acquisitions that include content, the state of the industry is apt to change considerably, to say the least.

With big players like AT&T and Disney entering the playing field, it can a major concern for investors in Netflix, as the options available to consumers continues to grow, and, more importantly, some of the content that Netflix gets from Disney, Time Warner and Fox may go away – or become much more expensive.

Competitive Landscape

2018 was a big year for the streaming world, as consumers continued to show their desire to “cut the cable cord” and break free from traditional cable providers. While Netflix continues to compete with Amazon Prime, Hulu, and HBO, several other new services were announced during 2018 and are expected to launch within the next 12 months.

The most notable announcement came from Disney, who announced during a media conference that it will be offering a family-focused serviced priced below Netflix comprised solely of Disney content. Additionally, Disney announced that its content currently on Netflix will be exclusively available on its new service once their licensing deal expires in 2019. Disney’s new service, Disney+, is expected to launch in late 2019. What makes Disney’s entrance in the streaming world even more interesting is the closing of Disney’s acquisition of Century Fox, which is expected to happen in early 2019. Upon closing, this will make Disney the majority shareholder of Hulu. Given the large scale of Disney (especially when including Century Fox and Hulu), its deep pockets

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This article was written by

Arturo Neto, CFA profile picture
I have been involved in financial services for almost 30 years. When I first started focusing on financial planning and money management it was out of a first-hand experience watching friends and family having to work well past retirement age because they hadn't saved or invested enough. Eventually I landed in a family office worth hundreds of millions of dollars where I was able to see 'how the other half lived' so to speak. I now operate a wealth advisory firm and publish articles on Seeking Alpha for DIY investors that prefer to manage their own money. As publisher of The Income Strategist, a premium subscription service on SA, my goal is to guide investors on how best to generate income from their investments. The service includes several income portfolios with different strategies that members can use independently or in combination. As part of the service, I also collaborate with other SA authors to provide broader and deeper coverage of investing. In addition to being a Chartered Financial Analyst, I am also a Certified Private Wealth Advisor and have an MBA from the Darden Graduate School of Business at the University of Virginia. I also hold a Master of Science in Finance and Bachelors in Finance from Florida International University. Having lived in Miami almost my entire life, my family and I relocated to Nashville, Tennessee in May 2018 in the pursuit of a better lifestyle and southern hospitality. If you're ever in the area, please do reach out. I'm happy to be teaming up with the following expert analyst contributors:1. Dilantha De Silva2. The Belgian Dentist

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in NFLX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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