When I look at the entertainment industry today, man, have things changed.
Gone are the days I used to sit on the floor in front of my 20-inch TV screen, twisting the knob to switch between the 13 existing channels trying to find The Brady Bunch.
Nowadays, you just sit back on the couch and say “The Office” into your remote and boom, there’s Michael Scott making a fool out of himself right in front of you.
Kids nowadays are growing up without even having to sit through commercials, as streaming has truly become the dominant form of television.
Netflix Inc. (NASDAQ: NFLX) was the first to make the move into streaming, and it’s been the leading company in the industry for years now.
But there’s steeper competition on the horizon for NFLX. It may not be number one for long, and when it drops it could take investors’ portfolios down with it.
Here’s what I mean…
The Only Way to Make Money Off of the “Streaming War”
Netflix Inc. (NASDAQ: NFLX) has been the acknowledged market leader in streaming since it launched its streaming service 10 years ago. The media company has over 150 million subscribers worldwide, and its stock has outperformed the S&P 500 for the year.
But its leading position may not last. NFLX is already facing competition from Hulu and Amazon.com Inc.’s (NASDAQ: AMZN) Prime streaming service. And later this year, more competition is going to come in swinging hard…
Apple Inc. (NASDAQ: AAPL) and Walt Disney Co. (NYSE: DIS) are launching their own subscription streaming services by the end of this year, with Warner Media, Comcast Corp. (NASDAQ: CMCSA), and NBC Universal following in 2020.
As new streaming services hit the scene, they’re starting to take content back from NFLX. In fact, the literal show-stealing has already begun…
At the end of this year, two of NFLX’s top sitcoms will leave the service. Friends will stop streaming exclusively on NFLX and instead move to HBO Max. And the aforementioned The Office will leave at the end of 2020, moving to NBC Universal in 2021.
If rival services continue taking back their own content, then it could erase nearly 20% of NFLX’s total content library, according to analyst firm Ampere Analysis.
Now, NFLX claims that these other streaming services aren’t their competition. In a letter to shareholders, the company claimed that it isn’t focused on Disney or Amazon. But NFLX reported earnings last week on Wednesday, the 17th, and the numbers tell a different story…
The streaming giant reported subscriber growth of 2.7 million. That’s almost half analyst’s expected 5.3 million, and practically one-third its additions from the last quarter. And the stock reacted, dropping a whopping 10% in afterhours trading.
After that, the stock fell for nine days straight – its worst losing streaking since March 2014. And during the 2014 slump, shares only lost 8%. Now, they’ve lost nearly 20%.
It seems that NFLX’s reign could be ending. If that happens, investors are going to get hit hard.
But you could actually bank a serious gain on the top streaming company’s fall from grace…
If you use options, that is.
Put options give you the right to sell a certain security at a specified price by specified date. And here’s the best part: when the stock falls, you profit.
Here’s an example…
Just this past May, my readers bought a June 14, $27 Put on Alcoa Corporation (NYSE: AA), an industrial company that looked poised to fall, just like NFLX. And fall it did…
When we bought the option on May 7, AA shares were trading around $25.61. By May 31, the stock had dropped to $21.26. And we sold our put for a 185% gain in under one month.
Make no mistake: As long as you have this strategy in place, you’ll be set up so you can profit.
Just look at how it helped one of my Weekly Money Call readers, Mark Edison, have the funds for a much-needed vacation…
“I finally have high hopes of true financial independence,” he wrote me. “I just made 88% in 48 hours! Now, I’m headed to Vegas, baby!!”
Congrats, Mark!
Are you ready to have the power to take a vacation anytime you want, just like Mark?
Learn how to get all my Weekly Money Call recommendations right here.
To your success,
Tom Gentile
America’s #1 Pattern Trader
