Coronavirus: Netflix, Amazon and other 'stay-at-home' services profit as more people stock up, stay indoors
With online grocery demand surging amid self-quarantine measures, Morgan Stanley expects the ease and convenience of shopping online for consumables to lead to more long-term online purchasing
While the stock market continues to largely follow a downward trend in the wake of the increasing number of confirmed cases of the novel coronavirus (COVID-19), some companies are set to fare better, such as Netflix and Amazon whose customer base is increasing amidst the containment measures.
Netflix stock (NASDAQ: NFLX) has fared better than the broader markets through the current COVID-19 crisis, with the stock currently up by about 2% since early February, after the World Health Organization (WHO) declared a global health emergency. In comparison, the S&P 500 is down by about 18%.
As more people are confined to homes and more public forms of entertainment are shut down, Netflix (as well as Amazon Prime, Disney+, Hulu, and others) looks to benefit as it is viewed as a "stay-at-home" stock.
However, Needham analyst Laura Martin has suggested that Netflix may yet fall prey to the ongoing pandemic. According to Martin, having more people at home to binge more hours of Netflix won’t necessarily translate into higher revenue for the company.
Martin also noted that Netflix may soon enter a price war with other streaming services. She noted that the Netflix market in the United States is saturated at over 60 million viewers and is unlikely to add new subscriptions in the country.
Martin also notes that the crisis could cap Netflix's international subscribers. “Italy just quarantined its entire country implying millions of travel employees are not going to work or get paid, and travel globally has declined precipitously,” Martin said. “Since NFLX is a luxury, we assume international churn will rise and offshore revenue growth will slow until COVID-19 retreats.”
Along with other networks, Netflix has shut down production on all its shows filming within the United States and Canada. Just recently, production on 'The Witcher' was halted for "deep cleaning" following actor Kristofer Hivju's announcement that he had tested positive for the COVID-19 virus.
Meanwhile, Morgan Stanley has chosen Amazon as the company to survive the pandemic. With online grocery demand surging amid self-quarantine measures, Morgan Stanley expects the ease and convenience of shopping online for groceries and consumables to lead to more long-term online grocery purchasing.
Amazon's stocks rose on Monday, March 16, as the company announced it would hire an additional 100,000 employees in the US to meet the rising demand in online shopping amid the coronavirus outbreak. The company plans to invest more than $350 million globally to increase pay by $2 per hour in the US and in other countries for employees and partners who are in fulfillment centers, transportation operations, stores or those making deliveries.