Amid the novel coronavirus pandemic, a few companies stood out as potential bright spots. One of them, of course, was Netflix (NASDAQ:NFLX). As a streaming giant and content producer, Netflix already deeply embedded itself into the popular culture lexicon. But with the Covid-19 outbreak forcing everyone to shelter in place, the case for NFLX stock became even more relevant.
Better yet, shares have held up well despite states moving to reopen their economies. Primarily, even with millions returning to their jobs, many white-collar workers are still operating remotely. Considering that college-educated adults are among the least affected by the pandemic, this labor force cohort offers the best of both worlds for NFLX stock: it’s still pulling in a paycheck and it has more time to enjoy the product.
Now, it’s true that shares have tumbled recently due to broader market jitters. As you’ve undoubtedly heard, many states are seeing a huge rise in daily coronavirus infections. On June 26, daily cases in the U.S. breached the 40,000 mark for the first time. This caused Texas to halt its reopening measures. And in the West, California reinstituted stay-at-home orders for its worst-hit county near San Diego.
Cynically, though, this could be another big opportunity for NFLX stock. While it’s highly unlikely that the Trump administration will order another lockdown, people can choose to self-quarantine. Given that most of us have quickly adopted “new normal” protocols — social distancing, wearing face coverings, etc. — going for another round of sheltering in place wouldn’t be the worst thing in the world.
Certainly, it would again give Netflix another free marketing opportunity. Here are three more reasons to like NFLX for the long run.
Movie Theater Pain is NFLX Stock Gain
I own shares of AMC Entertainment (NYSE:AMC) and it’s pretty much going how you might imagine. When coronavirus cases started to increase, AMC began tumbling. And it’s no surprise why.
Outside of restaurants and cruise ship operators, you’d be hard pressed to find a sector worse off than the cineplex. Due to the highly contagious nature of Covid-19, the last thing you want to do is to breathe recycled air of hundreds of strangers. Plus, going to the movies is completely discretionary.
At least with airliners, for instance, you could have an excuse for being there that potentially outweighs the health risk. You absolutely can’t say the same thing about the box office.
Suggesting the idea of NFLX stock in this context feels like kicking someone when their down. Part of me feels terrible. However, you can’t deny the obvious. When people want their entertainment content fix but can’t go to the cineplex, they’ll subscribe to Netflix. It’s really that simple.
Live Sports Also at Risk
Another cynical factor that supports NFLX stock during this reemergent crisis is the return of sports. Several weeks ago, motor racing got things moving with NASCAR resuming its coronavirus-disrupted season. Later, open-wheel Indy car brought some much-needed flair for racing and sports fans.
For a while, things looked good. The NBA was scheduled to come back in late summer, while MLB was working furiously to salvage its season. Basically, the needle was moving in the right direction … until it wasn’t.
To be clear, no sports league has officially declared their season cancelled. However, it’s also fair to point out that the signs don’t look great. Not too long ago, for instance, baseball commissioner Rob Manfred stated that he was “not confident” that baseball would be played this year. Apparently, a restructured season will finally go through but that may not be guaranteed if the pandemic worsens.
As well, rumors suggest that many NBA players are not happy about moving forward, for both health and social reasons. A second wave of coronavirus would certainly fuel these concerns. If that were to happen, NFLX stock, again, would probably be a beneficiary.
Why? Aside from providing alternate entertainment, sports broadcasting was one of the few advantages of linear (traditional) TV. With that gone, streaming platforms would almost have a monopoly.
NFLX Stock is Cheap
In a way, a second wave would be ridiculously favorable to NFLX stock on a longer-term basis. Imagine, you can’t go outside and there’s nothing to watch on “regular” TV. Why pay the ridiculously high charge of traditional subscription services when you can go with Netflix?
Personally, I’ve had my own corona moment. After switching virtually all of my discretionary purchases online, Amazon’s (NASDAQ:AMZN) algorithm asked me a simple question: do you want to try Amazon Prime for free? You get free shipping and a free selection of quality content, not like the BS “free content” that you get from Roku (NASDAQ:ROKU).
I said “yes” and I couldn’t be happier. One of the first movies I watched on Prime was Midsommar, a movie so violently disturbing that it caused my wife — who did not see the movie — to have nightmares about it. Freaky stuff.
Maybe I didn’t make the best choice. But I’m really looking forward to Rambo:Last Blood to indulge my guilty pleasures. The point is, I think Prime is the greatest thing ever, in part because it’s so cheap. While I don’t have a Netflix subscription, I’m sure that streaming service’s fans feel the same way. Actually, they won’t stop talking about it.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he, regrettably, owns AMC.