Market Overview

Three Competitors Outperforming Netflix

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With news that Netflix (NASDAQ: NFLX) may be hiding more than $3.6 billion in debt off its books, both subscribers and investors may be thinking about other options. Citigroup (NYSE: C), in its recently released report on Netflix, remained positive on the stock, though it did mention that competition remained "a very significant risk."

But who are Netflix's competitors? Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) are through their iTunes and YouTube businesses, while (NASDAQ: AMZN) competes through its streaming video service.

Shares of Amazon jumped 16 percent in late April following a strong earnings report. The stock is up around 30 percent year-to-date despite trading mostly between $210 and $230 since the beginning of May. This S&P 500 component is headquartered in Seattle and has a market capitalization of more than $100 billion. Investors will note the encouraging long-term earnings per share (EPS) growth forecast of about 31%. However, while Amazon's forward earnings multiple is less than its price-to-earnings ratio (P/E), that P/E is much greater than the industry average. Still, over the past six months, the stock has outperformed Netlfix and the S&P 500.

The Redbox DVD rental by kiosk service is also a main competitor to Netflix. Coinstar (NYSE: CSTR), which owns Redbox, has seen its share price rise more than 63 percent in the last six months, and shares reached a new multiyear high last week. The specialty retailer has more than 35,000 Redbox kiosks, as well as a market cap of more than $2 billion. Investors may like the healthy return on equity of about 30.7 percent, as well as the consensus price target that is more than 15 percent higher than the current share price. However, investors should also note that company's short interest is more than 31 percent of the float. But over the past six months, the stock has outperformed Netflix and the broader markets.

Philadelphia-based Comcast (NASDAQ: CMCSA), besides partnering with Disney (NYSE: DIS) and News Corp. (NASDAQ: NWS) to bring Hulu online video to the Internet, also offers streaming video on demand to its subscribers. Shares have pulled back more than 3 percent from a recent multiyear high, and the share price is up more than a third year to date. This S&P 500 component and cable TV provider has a market cap of more than $84 billion. The company also offers a dividend yield near 2 percent and has long-term EPS growth forecast of 15.6 percent. While the P/E ratio is higher than the industry average, Comcast's forward earnings multiple is lower than its trailing P/E. Like Amazon and Coinstar, Comcast has outperformed Netflix over the past six months.

Investors who want to stick with Netflix but spread the risk around may want to consider the following exchange-traded funds invested in the stock. These ETFs are all up more than 10 percent year to date and trading within about 10 percent of their 52-week highs.

  • Consumer Discretionary Select Sector SPDR (NYSE: XLY)
  • First Trust NASDAQ-100 ex-Tech Sector Index (NASDAQ: QQXT)
  • PowerShares NASDAQ Internet (NASDAQ: PNQI)
  • PowerShares QQQ (NASDAQ: QQQ)
  • SPDR S&P Retail (NYSE: XRT)

Posted-In: Earnings Long Ideas News Short Ideas Intraday Update Tech Trading Ideas ETFs Best of Benzinga


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