Apple (AAPL) may be teasing a bigger streaming content push at a big event scheduled for Sept. 14, but Wall Street thinks Netflix (NFLX) will remain the dominant force in the streaming category for years to come.
"I have not been impressed by what Apple has done. They have created a couple quality shows and a lot of less than interesting shows. They are just not getting that broad appeal yet," said Bank of America analyst Nat Schindler on Yahoo Finance Live. "They obviously have a lot of money, so they could really invest a lot. But they haven't to date. Their initial investment of about $1 billion in content is chump change. Netflix does that in much less than a month at this point."
Netflix has said it intends to spend $17 billion to produce content in 2021. While reports in 2017 said Apple was spending just $1 billion on its initial slate of original content, by 2019 the tech giant had reportedly increased its original content budget to $6 billion to compete with the bigger streaming giants. That may still not be enough, though.
The optimism on Netflix's content slate (and not much enthusiasm for Apple's...) and how it may lead to a pickup in subscriber growth in coming quarters has recently propelled the stock to new heights.
Netflix shares are up close to 17% over the past month to just over $600. The stock is by far the best component of the closely watched FAANG stock complex [Facebook, Apple, Amazon, Netflix and Google] during this span, topping a 7% gain for Apple.
The stock is hovering around record highs.
Schindler points to a few reasons behind the strong upside move in Netflix shares.
For starters, the FAANG complex has fallen back into favor among investors as a hedge on a slowing U.S. economy due to the Delta variant. Schindler says investors are now catching back up to the growth story of Netflix after the stock had lagged for most of 2021 amid concerns about post-pandemic demand.
Meanwhile, the Street appears to be waking up to the financial power of the company's upcoming content slate. Schindler is particularly bullish on the company's content for the balance of 2021.
"For 2H21, we see continuation of some highly viewed Netflix TV shows, such as The Witcher S2 (S1: 76m views), Money Heist Part 5 (P4: estimated 65m), Cobra Kai S4 (S3: 45m), and Lucifer S6 (S5: 38m), as likely to drive subscriber growth. Looking ahead, we see Stranger Things S4 (S3: 64m), Ozark S4 (S3: 29m), and Bridgerton S2 (S1: 82m) as most important for Netflix," Schindler wrote in a research note ahead of his comments to Yahoo Finance Live.
He added, "Netflix’s 2H21 content slate so far seems solid compared to other platforms and we might see new content announcements on Sept. 25 during TUDUM, Netflix’s first global fan event."
Schindler has a buy rating on Netflix shares with a $680 price target.