The panic caused by coronavirus is spreading all over the globe and has become the biggest threat to the world's economy.. Most industries are hit, but some niches have the potential to use the situation to their advantage.
For example, companies connected with the production and distribution of hygiene products (like hand sanitizers) and self-protective products (like masks and gloves) are obvious winners of this drama, but who else is capable of going up on the investors' leader? Streaming is one of the industries which is worth following in the upcoming period, and its king, Netflix (NASDAQ: NFLX), could be the best choice for investors.
Why The Streaming Industry?
One of the main measures taken to fight the coronavirus spread is to stay at home in order to avoid crowded places like restaurants, bars and cinemas. This will cause deep changes in people's behavior. It is only logical to expect that families will spend much more time together and seek comfort from boredom and family-issues in their TVs.
Companies that are focused on providing entertainment at home are well positioned while the number of people in home isolation rises. But even though viewing hours will explode through the rooftops, it doesn't necessarily mean that the profit of Netflix will go up.
What Are The Main Concerns?
The main goal for a niche leader will be to acquire more customers in this period because the additional viewing from current customers will not bring in any extra profit. This is in line with the fact that consumers pay a fixed amount every month. Netflix's price is between $9- 16 per month, while there is strong competition in The Walt Disney Company (NYSE: DIS)'s new streaming service Disney + as well as Amazon.com, Inc.'s (NASDAQ: AMZN) streaming services which are less expensive with a monthly falling in the range of $6-7.
Beyond the competition, one of the main concerns is the capacity and willingness of citizens to become subscribers in the first place, having in mind that those services are considered luxury ones. Although many if not all existing consumers will argue that that they are essential.
What Is Netflix's Weapon?
Netflix is a market leader with 167 million subscribers and with an inflow of 20 billion dollars. These numbers provided an investment of 15 billion dollars in the previous year. The streaming giant is investing heavily into new content and that will surely have a positive impact on potential subscribers and their willingness to buy their service.
This positive chain of events is likely to lead to more revenues in the following period, further creating more space for new investments and finally resulting in new customers who find all that content appealing enough to subscribe.
Netflix Is Doing Okay Despite The COVID-19 Turbulence
Since the markets tumbled due to the impact of COVID-10, Netflix has managed to show better results than the overall market. Netflix is down by 9% year to date whereas the S&P 500 recorded a drop of 26%. If we look further into the past and the period of the previous financial crisis of 2007-2009, Netflix income growth also managed to remain relatively stable. Having in mind all of this, we can conclude that it is not at all unlikely for Netflix stock to bring a piece of good news for investors during this everything-but-good nightmare the world has found itself in.
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