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The FAANG team of mega cap stocks produced hefty returns for investors during 2020.

The group, whose members include Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) benefited greatly from the COVID-19 pandemic as individuals sheltering in place used their products to shop, work and entertain online.

Of the older 12 months alone, Facebook gained thirty five %, Amazon rose 78 %, Apple was up 86 %, Netflix saw a 61 % boost, along with Google’s parent Alphabet is actually up thirty two %. As we enter 2021, investors are actually asking yourself in case these tech titans, optimized for lockdown commerce, will achieve very similar or much more effectively upside this year.

From this number of five stocks, we are analyzing Netflix today – a high-performer throughout the pandemic, it’s today facing a unique competitive threat.

Stay-at-Home Appeal Diminishing?
Netflix has been one of probably the strongest equity performers of 2020. The company and its stock benefited from the stay-at-home environment, spurring desire due to its streaming service. The stock surged aproximatelly ninety % off the low it hit on March 16, until mid October.

NFLX Weekly TTMNFLX Weekly TTM
Nonetheless, during the previous three weeks, that rally has run out of steam, as the company’s primary rival Disney (NYSE:DIS) acquired a lot of ground in the streaming battle.

Within a year of the launch of its, the DIS’s streaming service, Disney+, today has more than eighty million paid subscribers. That’s a significant jump from the 57.5 million it found to the summer quarter. Which compares with Netflix’s 195 million subscribers as of September.

These successes by Disney+ arrived at the same time Netflix has been reporting a slowdown in the subscriber development of its. Netflix in October reported that it included 2.2 million members in the third quarter on a net schedule, light of the forecast of its in July of 2.5 million new subscriptions for the period.

But Disney+ is not the sole headache for Netflix. AT&T’s (NYSE:T) WarnerMedia division is within the midst of an equivalent restructuring as it focuses on its latest HBO Max streaming platform. Also, Comcast’s (NASDAQ:CMCSA) NBCUniversal is realigning its entertainment businesses to give priority to its new Peacock streaming service.

Negative Cash Flows
Apart from growing competition, the thing that makes Netflix more vulnerable among the FAANG group is the company’s tight cash position. Given that the service spends a great deal to create its exclusive shows and capture international markets, it burns a lot of cash each quarter.

to be able to improve its cash position, Netflix raised prices for its most popular plan throughout the last quarter, the second time the company has done so in as many years. The move might prove counterproductive in an environment wherein men and women are losing jobs as well as competition is heating up. In the past, Netflix price hikes have led to a slowdown in subscriber development, particularly in the more mature U.S. market.

Benchmark analyst Matthew Harrigan previous week raised very similar fears into the note of his, warning that subscriber advancement may well slow in 2021:

Netflix’s trading correlation with other prominent NASDAQ 100 and FAAMG names has now obviously broken down as one) confidence in its streaming exceptionalism is fading relatively even as two) the stay-at-home trade could be “very 2020″ in spite of some concern over just how U.K. and South African virus mutations can impact Covid 19 vaccine efficacy.”

The 12-month cost target of his for Netflix stock is actually $412, about 20 % below the present level of its.

Bottom Line

Netflix’s stay-at-home appeal made it both one of the greatest mega hats as well as tech stocks in 2020. But as the competition heats up, the business needs to show it is the top streaming option, and that it is well-positioned to protect its turf.

Investors seem to be taking a break from Netflix inventory as they wait to see if that will occur.

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