Last year was a wild ride for the tech and entertainment sectors, mostly thanks to inflation going through the roof and rattling the stock market’s nerves. Industry bigwigs like Amazon and Netflix, juggernauts in both tech and showbiz, got smacked hard. Their stocks plummeted by nearly half over the course of 2022.
To the eagle-eyed investor, this scenario screamed a “buying opportunity” and rightly so, with Netflix climbing 49% year-to-date and Amazon up 58%.
Last year’s cool-off gave Amazon and Netflix stocks a bit of a breather and set the stage for a full-on rally this year so now’s the time where the rubber really hits the road: Between these two behemoths, where should you throw your hat? Time to break out the magnifying glass and find out which of these tech titans deserves a spot in your investment portfolio: Amazon or Netflix?
Netflix Has Unique Competitive Advantages
Netflix was a pioneer in the streaming services industry, and it has long held the title of market leader.
The company spends big on original content, and it has a knack for making the programs and films people want, thanks to its carefully-guarded database of detailed information on what, when, and how people watch.
In addition to its massive content library, Netflix leads in technology. It is regularly ranked number one in terms of user experience.
One of the benefits of being an industry leader is that everyone knows the brand. That makes it easier to expand into new markets. Today, Netflix offers service in more than 190 countries.
It is particularly attractive to local audiences, because part of the company’s investment in original content goes directly to creating original programming that appeals to niche markets. It tailors subject matter and language to small groups around the globe – something its competitors can’t or won’t match anytime soon.
The strategy to penetrate new markets is working, and Netflix is growing its subscriber base at a rapid rate. When the company reported its most recent quarterly results, it announced it was up to 238 million subscribers.
Other results for the third quarter include sales of $8.1 billion – a 2.7 percent increase yoy – and earnings of $3.29 per share versus just $0.12 two quarters ago.
Many analysts speculate that Netflix’s growth prospects are essentially unlimited. There are still billions of potential customers that can be reached, and no one thinks Netflix has hit the ceiling in terms of monthly subscription fees. In other words, Netflix remains a smart buy.
Over time, Netflix has also leveraged its customer loyalty to boost monthly subscription prices. Each $1 hike in monthly prices is additive to margins and the bottom line, which should both be positive to NFLX share price long term.
Amazon Revenues Are Still Growing Fast
The e-commerce landscape had a rough go of it in 2022. As countries emerged from lockdowns and economies sputtered, online retail giants like Amazon felt the squeeze.
The investor mood was gloomy to say the least, sending Amazon’s stock tumbling over 50% from its 2021 high. But don’t count Bezos’s baby out just yet; recent numbers suggest that Wall Street might have been a tad too bearish on the company.
Time to dig into some key stats that point to a turnaround. First off, Amazon’s revenue climbed by 11%, and that wasn’t isolated to a single market; we’re talking robust growth across the board.
The company didn’t just rake in more money, it held onto it—operating profits shot up, more than doubling to a sweet $7.7 billion. Credit that to a swell in revenue coupled with some savvy belt-tightening measures.
The tale gets better. The company’s operating cash flow skyrocketed by 74%, hitting $62 billion over the past year. What did this mean for their free cash flow? It flipped from a troubling outflow of $24 billion to a reassuring inflow of $8 billion. Now, if that’s not a sign of a company potentially poised for a rebound, I don’t know what is.
In a recent report from Deloitte, researchers projected that e-commerce sales will account for between 25 percent and 35 percent more of total retail sales as compared to the same period last year.
Consumers spent $211 billion online this past quarter, and Amazon’s leadership role makes it the likely beneficiary of a large portion of this revenue. That translates into strong sales for Amazon and ever-increasing shareholder value. In other words, Amazon stock is a smart buy.
NFLX Diversifies to Take On Disney
Netflix is crafting a comeback that feels like a cliffhanger in one of its own series. After witnessing a slump in its subscriber count last year, the entertainment behemoth shifted gears, resulting in a resurgence of both its customer numbers and stock value.
What can we anticipate from Netflix and its stock in the near term, say, the next couple of years? Get comfy, because we’re about to dig deep.
There’s no way around it; monthly bills for streaming services are edging higher. Be it Netflix, Comcast’s Peacock, Apple TV+, Paramount Global, or even Disney+, most have either bumped their prices lately or are on the verge of doing so.
Hold onto your hats, folks! S&P Global Market Intelligence just dropped a bombshell: Your typical American family is now parting with 30 smackers a month on streaming alone. To put that into bar talk, that’s like buying a pitcher of your favorite IPA—twice the tab we had just half a decade ago.
Mix in a Deloitte report that’s flashing “subscription burnout” warning signs, and you’ve got a recipe for a viewer retention headache.
But Netflix? It’s chillin’ like a villain. With a jaw-dropping 75 million subscribers in just North America, they’ve left Disney+ eating their digital dust—by a casual 30 million users.
A Bet on Button Mashing
While industry titans like Disney and Comcast are juggling multiple balls—think amusement parks to platinum records—Netflix has been a sharpshooter with eyes only for streaming. But last year, they decided to toss their hat into the gaming arena. And we’re not talking Fortnite-level, folks; we’re talking mobile games just for the Netflix faithful.
Reed Hastings, Netflix’s co-pilot at the time, was straightforward about it. They were ready to “ride some waves,” even if it meant a wipeout or two. And a wipeout they had; barely 1% of Netflix users even clicked ‘download’ on these gaming options. But write Netflix off at your own peril—they see this as the next act in their evolving narrative.
Tech Titans’ Gaming Gambit
It’s not like Netflix is the new kid in the gaming playground. Tech behemoths like Google, Microsoft, and Amazon have already taken their swings—and they’ve been, well, a mixed bag. While platforms like OnLive and Google’s Stadia went out like a light, Amazon’s Luna and Microsoft’s Xbox Cloud Gaming are still slugging it out, fighting for a piece of the gaming pie.
Netflix has its gloves on too, stepping into cloud gaming with a few curated game titles like ‘Oxenfree’ and ‘Molehew’s Mining Adventure’—currently only in the U.K. and Canada. The cherry on top? You don’t need a high-end rig to play these, making gaming accessible to the Average Joe.
If this trial phase rocks the boat in the right way, Netflix could pivot its mobile gaming library to fit snugly into its streaming arsenal. That bonus feature could very well be the tiebreaker when subscribers ponder whether to keep or cut their Netflix lifeline.
Peering into our entertainment crystal ball, Netflix is doing more than vying for your next binge-watching marathon. They’re also eyeing to be your casual gaming lounge. If that’s not a plot twist worth a popcorn refill, I don’t know what is.
Amazon Bottom Line At Risk
Amazon relies on high levels of efficiency in its operations centers to keep the business profitable.
There is also some concern that Amazon will become a target of antitrust suits, given its massive size. It controls a large portion of the e-commerce market, and it operates a variety of divisions that expand its ability to influence the industry.
Plus, regulators from a variety of countries are taking a hard look at big tech, and Amazon is under intense scrutiny that could lead to legal action.
Amazon Vs Netflix Stock: The Bottom Line
In an Amazon vs. Netflix stock matchup, it’s a tough decision. Both companies are leading their respective industries and delivering strong returns for shareholders. More importantly, both have plenty of room to grow in the short-term and the long-term. Either would be an excellent addition to any portfolio, but if you must choose one, Amazon has a slight edge.
Amazon’s best-known for its e-commerce activities, but there is much more going on behind the scenes. The company has expanded to include a variety of tech businesses. That diversification in revenue streams makes Amazon stock slightly less of a risk as compared to Netflix.
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