Will Coronavirus Really Help Or Hurt Netflix Stock?

by Trefis Team
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Netflix stock (NASDAQ:NFLX) has fared better than the broader markets through the current Coronavirus/Oil price war crisis, with the stock currently up by about 2% since early February, after the WHO declared a global health emergency. In comparison, the S&P 500 is down by about 18%. On the face of it, Netflix stands to benefit from such a crisis, as it is viewed as a “stay-at-home” stock, that could see traction, particularly internationally, as more people are confined to their homes, eschewing more public forms of entertainment.

However, Netflix is somewhat saturated in the U.S. – its primary market – where subscriptions only grew by about 4% last year and household penetration stands at ~50% – giving it a somewhat limited upside for new subscribers. Moreover, Netflix is unlikely to be able to cash-in on the increasing number of hours streamed by its subscribers, as it operates on a fixed price model, unlike ad-supported streaming players such as Hulu whose revenue is levered to both the number of subscribers and hours streamed. (Related analysis: Why Netflix Should Seriously Consider An Ad-Supported Tier For The U.S.) Netflix is also increasingly relying on debt to fund its content spends (long term debt more than doubled over the last 2 years to close to $15 billion) and leveraged stocks typically don’t fare very well during such crises. (Related analysis: A deep dive into Netflix content spending).  Below we discuss how Netflix and the S&P 500 have fared thus far through the COVID-19 crisis and compare it to the performance through the financial crisis of 2008.

View our interactive dashboard analysis on 2008 Crisis vs. 2020 Coronavirus Comparison: How Did Netflix Stock Fare Compared with S&P 500?

Netflix vs. S&P 50o Performance During 2020 Coronavirus/Oil Price War Crisis

Netflix stock is up by about 1.4% since the WHO declared a global health emergency toward the end of January, although the stock declined by about 6% since the big market sell-off that started on March 9th, (through March 12), as Coronavirus cases accelerated in the U.S. and Saudi Arabia launched a price war in the oil markets. The S&P 500 was down by 8% since last week and by about 18% since early February.

Netflix Stock Vs. S&P 500 Performance Over 2007-08 Financial Crisis

NFLX stock rose from levels of around $3 in October 2007 to levels of over $5 in March 2009 and rose further to $7.90 in early 2010.
Through the crisis, NFLX stock actually gained as much as 71% between the market’s approximate pre-crisis peak and when the markets bottomed out. In comparison, the broader S&P fell by as much as 51%. The stock also continued to outperform rising 52% between March 2009 and January 2010. In comparison, the S&P 500 rose by about 48%.

For more detailed charts and a timeline of the 2008 and 2020 crisis, view our interactive dashboard analysis 2008 Crisis vs. 2020 Coronavirus Comparison: How Did Netflix Stock Fare Compared with S&P 500?

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