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The FAANG group of mega cap stocks manufactured hefty returns for investors throughout 2020.

The team, whose members include Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL) benefited immensely from the COVID-19 pandemic as men and women sheltering in position used the products of theirs to shop, work and entertain online.

Of the past year alone, Facebook gained 35 %, Amazon rose 78 %, Apple was up eighty six %, Netflix discovered a 61 % boost, as well as Google’s parent Alphabet is actually up thirty two %. As we enter 2021, investors are wondering in case these tech titans, enhanced for lockdown commerce, will bring very similar or a lot better upside this year.

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

Stay-at-Home Appeal Diminishing?
Netflix has been one of the strongest equity performers of 2020. The company and the stock benefited from the stay-at-home environment, spurring need for its streaming service. The inventory surged about 90 % off the minimal it hit on March sixteen, until mid October.

NFLX Weekly TTMNFLX Weekly TTM
However, during the previous 3 weeks, that rally has run out of steam, as the company’s main rival Disney (NYSE:DIS) received considerable ground in the streaming fight.

Within a year of its launch, the DIS’s streaming service, Disney+, today has more than 80 million paid subscribers. That’s a tremendous 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+ emerged at the same time Netflix has been reporting a slowdown in its subscriber growth. Netflix in October found it added 2.2 million members in the third quarter on a net foundation, light of the forecast of its in July of 2.5 million brand new subscriptions for the period.

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

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

In order to improve its cash position, Netflix raised prices due to its most popular plan during the very last quarter, the second time the company did so in as many years. The move could prove counterproductive in an atmosphere wherein people are losing jobs and competition is warming up. In the past, Netflix price hikes have led to a slowdown in subscriber growth, particularly in the more mature U.S. market.

Benchmark analyst Matthew Harrigan previous week raised similar concerns into his note, warning that subscriber growth could possibly slow in 2021:

Netflix’s trading correlation with various other prominent NASDAQ 100 and FAAMG names has now obviously broken down as 1) belief in its streaming exceptionalism is actually fading relatively even as two) the stay-at-home trade might be “very 2020″ even with a little concern about how U.K. and South African virus mutations can impact Covid-19 vaccine efficacy.”

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

Bottom Line

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

Investors appear to be taking a rest from Netflix stock as they hold out to determine if that can occur.

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