Week 3: Over the Hedge

ResizedImage600468Eggs

My mom always told me to hedge my bets. At a young age, she told me to “never put all your eggs in one basket. Diversify.” I’m confident this was a common message between most parents.

As an investor, its even more prevalent. And if there’s one phrase for Netflix’s movement this week, its this: “Diversify.” Netflix itself was not explicitly in the news this week often, but their future will be undoubtedly impacted by movements across the market.

According to an analyst at Guggenheim Securities, Netflix’s subscribers is primed for a third quarter increase. This comes on the heels of more content and licensing deals, enticing new users to join the platform. The analyst upgraded his target price from $360 to $420, indicative of his confidence in the stock’s future performance. This is a good sign for investors, for with a solid buy rating across the market, an investment at this point in the stock seems lucrative in the future.

The article, published by Investor’s Business Daily, also spoke to Netflix’s attempts to expand into the Indian market. I personally enjoy this move, for it demonstrates their attempt to be a global company. Online streaming is a largely unsaturated international market, primed for conglomerates like Netflix to make a killing overseas. While Netflix would love to expand internationally, it already has competition, and its only heating up.

This week, Bloomberg published an article about Comcast’s attempts to combat Netflix overseas through the acquisition of “European TV Giant” Sky. Comcast is losing its customers to Netflix’s services, for the wide content base as well as cheap price is appealing to young professionals and families alike. While it is uncertain whether this acquisition will ultimately benefit Comcast, it is a testament to Netflix’s importance domestically and internationally.

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Comcast beat out 21st Century Fox to acquire Sky earlier this week

I think that Netflix should continue to compete with TV giants. The age of paying for cable that you barely watch are gone. It’s time for on-demand streaming and endless movies. I would be curious to see if Netflix moves into the Live TV realm or stays with on-demand content to compete with other telecom companies.

So while you were binge-watching “Friends,” the S&P 500 came out with some exciting news. Starting this Monday, Netflix, along with tech giants Alphabet and Facebook, will be shifting sectors to a new “Communications” sector. This is investors attempts to regulate the high market cap of FANG stocks in the tech sector. Telecommunications itself will surely suffer, with many of its majors players moving sectors.

This move was very interesting to me. As a follower of the tech sector myself, I was a bit disappointed because telecom ETFs will likely take a hit in the coming days. However, I am excited at the possibility of getting in on the ground level of the new communications ETF, called Communications Service Select Sector. It should be interesting to see how the market reacts as well as what stocks join Netflix, Alphabet, and Facebook in this new sector.

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If nothing else, this demonstrates investors attempts to normalize the FANG stocks and their influence on the market. With volatility ahead, it should be an interesting few weeks.

I hope you hedged your bets folks, because we’re in for a wild ride.

 

Sources:

https://www.bloomberg.com/news/articles/2018-09-23/comcast-makes-risky-bet-on-global-scale-in-response-to-netflix

https://www.investors.com/news/technology/click/netflix-subscriber-growth-rebounding-q3/

https://www.cnbc.com/2018/09/21/on-monday-google-facebook-and-netflix-will-make-a-big-market-move.html

 

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