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While Amazon’s Prime Video service has been picking up some remarkable traction in recent years, with hit shows such as The Boys, Netflix remains the streaming leader.
Most importantly though, Netflix is a disruptor at heart, and it’s not afraid to back down from a fight, even if the odds are heavily stacked against it. For that reason, I remain bullish on Netflix. (See Netflix stock charts on TipRanks)
Furthermore, it’s not just Amazon’s push into SVOD (Streaming Video On Demand) that’s causing Netflix and Amazon to clash. Both companies are going after an even faster-growing market: gaming.
Netflix’s Gaming Push
Many non-gaming companies are starting to take the industry very seriously. Firms such as Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL), and Microsoft (MSFT) have opted to build up their own platforms with Apple Arcade, Stadia, and Xbox, respectively, while others have shown more of a willingness to spend heavily to develop the next hit game.
In this regard, the gaming industry is very much similar to on-demand video streaming. Platform, plus content, equals dominance.
That’s why Netflix’s gaming service could be a hit. It’s no stranger to spending heavily on content creation. It’s where Netflix shines. If the company can repeat its formula in this new industry, the potential rewards could be enormous.
However, unlike a video series, Netflix can’t really have the same flexibility to pull the plug on a game that doesn’t show promise. Undoubtedly, a considerable amount of cash has to go into a game before any evidence of success.
Most recently, Netflix acquired its first video-game developer in Night School, the studio behind Oxenfree. Investors should expect more such deals as the battle for gaming deals looks to level up.
Netflix’s Late Arrival
Amazon has had a toe dipped in the gaming waters for quite some time, acquiring Twitch many years ago. It also just released a blockbuster (or server-buster) title in New World at the end of September.
Prime users get a free Twitch subscription with their memberships, but Amazon’s gaming endeavor is not just an effort to widen the smile of its many satisfied Prime users.
Amazon is well-known for applying downward pricing pressure on the industries in which it competes. Whether it’s through getting rid of monthly subscription fees with New World or the free in-game items across a wide range of titles for Prime users, it’s clear that it’s going to be tough to top Amazon’s value proposition. Call it anti-competitive, but consumers can’t seem to get enough.
As such, don’t expect Netflix’s gaming business to be anything short of a black hole for cash. At least for the foreseeable future.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, NFLX stock comes in as a Moderate Buy. Out of 31 analyst ratings, there are 23 Buy recommendations, five Hold recommendations, and three Sell recommendations.
The average Netflix price target is $627.34. Analyst price targets range from a low of $342 per share, to a high of $780 per share.
Disclosure: Joey Frenette owned shares of Amazon and Apple at the time of publication.
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