Apple vs Netflix Stock: The number of technology startups is seemingly endless. Nearly every week, entrepreneurs introduce new, more efficient methods of managing the tasks of daily life.
All are hoping to follow in the footsteps of technology pioneers like Apple, Facebook, Netflix, Amazon, and Google. They want to transform the world – and make massive profits along the way. Most won’t catch on, and they will quietly disappear, and some will enjoy moderate success. Very few will have the impact of today’s tech giants.
For investors, it can be exhilarating to gamble on a small tech start-up with big ideas. However, most want a bit more security. While any investment carries risk, buying shares in one of the industry leaders is more likely to pay off sooner or later. The question is, which is best?
This is a look at Apple vs Netflix – two companies that have relied on innovation and creativity to deliver new ways to work and play.
Pros and Cons of Investing in Streaming Services
Whether or not to invest in streaming services is a tricky question. It often depends on who you ask, as well as which streaming service you have in mind. For a long time, Netflix had the market cornered. It offered the best technology and the biggest library of content.
Now, the field has gotten crowded. Most entertainment companies have accepted that streaming video has replaced traditional entertainment options in the hearts of consumers, and they are putting together their own subscription-based platforms in an attempt to capture – or recapture – market share. Apple is included in that list with its Apple TV+ service that features an exclusive selection of original programming.
The advantage to investing in streaming services is that the industry as a whole is expected to grow – a lot.
Consumers love the ability to customize programming and personalize it according to their viewing habits. It stands to reason that some streaming services will realize substantial profits during this period of growth and expansion, and shareholders of those companies will benefit along the way.
Because Netflix was the first streaming service to gain widespread consumer acceptance, it has a long head-start as compared to recently-launched competitors like Apple TV+, Disney Plus, and HBO Max.
However, given their respective resources and the content they own, it’s hard to say whether Netflix will retain its edge.
The biggest disadvantage to investing in streaming services really boils down to where to place your bets. The odds are most customers won’t pay for many of these services, perhaps one or two at the most.
With so many separate services after the same subscribers, any of these growing companies have potential to generate significant value for shareholders.
However, it’s likely that not all will be winners, and the wrong choice could be a costly error for investors.
Is Apple Stock a Buy?
The beauty of Apple is that its streaming service is just one of the products it has to offer.
The iPhone is still lucrative, despite the slowdown in demand, and computers, tablets, wearables, and accessories are generating impressive profits.
More importantly, some of those divisions are just starting out, so they have plenty of room to grow and market share to collect in both the short-term and the long-term.
As a result of its diverse mix of products and services, Apple shares have gained more than 84 percent over the past year.
This is particularly notable, because the growth coincided with a period in which the larger market has struggled through economic impacts from the novel coronavirus.
However, the most impressive figure of all is Apple’s size. It is the largest company by market cap among publicly traded US companies, with an astonishing value of more than $1.58 trillion.
Of course, that sort of value means share prices are fairly costly. In June 2020, Apple stock exceeded $360 per share.
Analysts are confident that Apple will continue to bring in outsized revenues, thanks to the company’s commitment to investing in new and innovative solutions for daily living. Its streaming service, Apple TV+, is just one of a long list of popular products. If the share prices fit into your investment strategy, Apple is a definite buy.
Should You Invest in Netflix?
Netflix achieved its leadership position in the streaming market by focusing on one thing, then doing that one thing better than any other company.
When stay-at-home orders were implemented, analysts didn’t worry about Netflix’s profits. They knew that the first move bored consumers would make would be a Netflix subscription, and they were right.
In the first quarter of 2020, Netflix gained 15.8 million net new subscribers, which was more than double the expected 7 million that business leaders predicted.
While the S&P 500 dropped one percent in the first five months of the year, Netflix gained 34 percent – and that’s in spite of heavy competition from newcomers like Disney Plus.
Certainly, all of those new subscribers might not stick around forever, but Netflix has plenty to look forward to regardless.
The company is working hard on its international expansion, and it is developing ever-more-targeted content for audiences with every type of interest. In addition to its collection of popular movies and programs from a variety of sources, Netflix has set a high bar for original content.
Substantial investments in original programming have given Netflix subscribers exclusive access to high-quality – and extremely popular – offerings. That popularity translates into free consumer-generated marketing on social media, which in turn leads to more subscribers.
Perhaps the most important thing to remember about Netflix is that subscribers don’t have an “either/or” choice when evaluating against the competition.
While some prefer to limit the number of subscription-based services they pay for each month, some viewers happily take on the costs for several video streaming services.
For investors, it’s important to note that shares of Netflix are even more expensive (by price not market capitalization) than shares of Apple. However, if price doesn’t deter you, Netflix is another solid buy.
Apple vs Netflix Stock: The Bottom Line
The choice between Apple and Netflix is often a subject of debate among investors and analysts. After all, both have strong prospects for growth, and both are leaders in their respective industries. Either is likely to benefit your portfolio.
If you are limited to just one of these companies, Apple has a slight edge due to its diverse product line and installed base of iPhones. As any new iPhone buyer will attest, Apple promotes its streaming service soon after purchase, and when you consider the millions of iPhone users just a small percentage of adopters could spell trouble for Netflix over the long term.
Apple has demonstrated over and over again that it is creating the future, not following along behind others. When Apple develops its next innovation, those who have already invested are likely to enjoy impressive profits.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.