The worst nightmare of Netflix is ​​coming true



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If you have read & nbsp;RiskHedge, you know I've been warned to keep money off of the beloved Netflix Stock Exchange (NFLX).

This was not a popular thing to say & nbsp;when I first wrote in July.

At that time, Netflix was the hottest action on Wall Street. It rose 107 percent in six months, hitting record highs.

But it turns out that July was the right time to sell Netflix. Since then, it has fallen 37%:

RiskHedgeRiskHedge

The best days of Netflix ended

You can review my reasoning on why Netflix is ​​doomed & nbsp;On here& nbsp; and & nbsp;On here. It all boils down to the disruptive business life cycle.

Netflix was a pioneer in streaming video, where you watch shows over the Internet, not cable.

For years, it was the only streaming service in the city. The first investors achieved this unprecedented advantage, with gains of 10,000% from 2008 to July this year.

Today I see three other companies in the same position that Netflix was in 2008. I wrote a free special report on these actions with detailed research and my suggested purchase prices. Download here for free.

But for Netflix, the near zero-competition era is over.

Now it is facing powerful rivals like Disney (DIS) –which I recommended you buy in July.

Disney will launch its own streaming service called "Disney +" next year. It will take all your shows and movies from Netflix and put them on Disney +.

This is a big problem for Netflix because Disney has the best content in the world for a long time. She owns domestic brands like Marvel … Pixar Animations … Star Wars … ESPN … ABC … X-Men … not to mention all the traditional characters like Mickey Mouse and Donald Duck.

When it's released next year, Disney + will be an easy buy for most families. I will certainly sign up for my daughter.

Meanwhile, Netflix will lose much of its best content … and potentially millions of subscribers who migrate to Disney +.

Amazon is gaining a foothold in streaming, too

In February, Amazon (AMZN) announced it would spend $ 5 billion to develop original shows and movies this year. In response, Netflix increased its spending by 50%.

Netflix has planned to spend $ 8 billion on shows and series this year … now, it will spend about $ 12 billion. It now invests more in content than any other American TV network.

Keep in mind that Amazon is the third largest publicly traded company in the world. It has much deeper pockets than Netflix or even Disney.

To have some hope of keeping up with its rivals, Netflix should continue to increase its spending on content.

The problem is you can not.

Netflix makes only a small profit, so you have to borrow money to fund your creation. Its debt exploded 71 percent last year to $ 8.3 billion.

This is not sustainable.

Now, Netflix has three bad choices: continue borrowing billions and burying yourself more deeply into debt … dramatically increase your subscription pricing … or reduce new content.

I recommend to Disney

Netflix was trading at $ 400 when I first sounded the notice …

Today it fell to about $ 275.And as I mentioned last timemy research shows that it is worth $ 190 to $ 200 per share at most.

So Netflix is ​​still a "no-touch."

Disney, on the other hand, has gained 11.5 percent since July and reached record highs in early November. This is most impressive given that most stocks have struggled in recent months.

Disney is still a great buy for the current price of $ 116. My research shows that it's going to cost $ 170 – about 45% higher than today.

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If you have been reading RiskHedge, you know I've been warned to keep money off of the beloved Netflix Stock Exchange (NFLX).

This was not a popular thing to say when I first wrote in July.

At that time, Netflix was the hottest action on Wall Street. It rose 107 percent in six months, hitting record highs.

But it turns out that July was the right time to sell Netflix. Since then, it has fallen 37%:

The best days of Netflix ended

You can review my rationale as to why Netflix is ​​doomed here and here. It all boils down to the disruptive business life cycle.

Netflix was a pioneer in streaming video, where you watch shows over the Internet, not cable.

For years, it was the only streaming service in the city. The first investors achieved this unprecedented advantage, with gains of 10,000% from 2008 to July this year.

Today I see three other companies in the same position that Netflix was in 2008. I wrote a free special report on these actions with detailed research and my suggested purchase prices. Download here for free.

But for Netflix, the near zero-competition era is over.

Now you're facing powerful rivals like Disney (DIS), which I recommended you buy in July.

Disney will launch its own streaming service called "Disney +" next year. It will take all your shows and movies from Netflix and put them on Disney +.

This is a big problem for Netflix because Disney has the best content in the world for a long time. She owns domestic brands like Marvel … Pixar Animations … Star Wars … ESPN … ABC … X-Men … not to mention all the traditional characters like Mickey Mouse and Donald Duck.

When it's released next year, Disney + will be an easy buy for most families. I will certainly sign up for my daughter.

Meanwhile, Netflix will lose much of its best content … and potentially millions of subscribers who migrate to Disney +.

Amazon is gaining a foothold in streaming, too

In February, Amazon (AMZN) announced it would spend $ 5 billion to develop original shows and movies this year. In response, Netflix increased its spending by 50%.

Netflix has planned to spend $ 8 billion on shows and series this year … now, it will spend about $ 12 billion. It now invests more in content than any other American TV network.

Keep in mind that Amazon is the third largest publicly traded company in the world. It has much deeper pockets than Netflix or even Disney.

To have some hope of keeping up with its rivals, Netflix should continue to increase its spending on content.

The problem is you can not.

Netflix makes only a small profit, so you have to borrow money to fund your creation. Its debt exploded 71 percent last year to $ 8.3 billion.

This is not sustainable.

Now, Netflix has three bad choices: continue borrowing billions and burying yourself more deeply into debt … dramatically increase your subscription pricing … or reduce new content.

I recommend to Disney

Netflix was trading at $ 400 when I first sounded the notice …

It dropped to around $ 275 today. And as I mentioned last time, my research shows that it is worth $ 190 to $ 200 per share at most.

So Netflix is ​​still a "no-touch."

Disney, on the other hand, has gained 11.5 percent since July and reached record highs in early November. This is most impressive given that most stocks have struggled in recent months.

Disney is still a great buy for the current price of $ 116. My research shows that it's going to cost $ 170 – about 45% higher than today.

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