1 Innovative, Profitable Company = An Endless Spawn of Competition

Netflix's first-mover advantage is being threatened by the likes of Amazon.com, Hulu, and even AOL. Home Depot sends the Dow lower as home sales fall.

Apr 23, 2014 at 6:20PM

It was back to reality for the stock market today, as the Dow Jones Industrial Average (DJINDICES:^DJI) ended in the red after shockingly weak real estate numbers put investors on edge. Econoday was hoping for annualized new home sales between 440,000 and 470,000 in March. Unfortunately Econoday set its sights too high, and new home sales plunged, falling 14.5% from the year before to an annualized pace of 384,000. Thankfully, last month's soft sales are largely indicative of booming real estate prices, which have soared 12.6% in the last year. A choppy session of trading ended with the Dow down 12 points, or 0.1%, to end at 16,501. 

Home Depot (NYSE:HD) shareholders, naturally, had no reason to applaud today's pitiful housing numbers. So they didn't. Instead investors sold off Home Depot stock to the tune of 1.4%, making it one of the Dow's worst performers of the day. While the daily ups-and-downs of individual stocks don't always (or often, even) happen for good reason, I think the softening of the real estate market is a very real risk for Home Depot investors. All signs point to interest rates remaining low indefinitely, but that doesn't mean home sales will keep chugging along if prices are going bonkers as well. Since home remodeling projects would likely suffer with falling home sales, Home Depot's bread and butter business would also take a hit. Let's hope last month's new home sales were just a fluke, then!


Tony's back. On Amazon. Source: Amazon.com

If there's one thing that's not a fluke, it's Netflix (NASDAQ:NFLX) and its absurd popularity. The streaming video service has more than 44 million customers in 41 countries, and numbers don't lie. Though shares shed 5.2% today, Netflix investors probably weren't heading for the exits because a few realtors went without their commissions in March. Netflix has so completely dominated such a lucrative industry for so long that competitors are beginning to pop up like whack-a-moles in theme parks. 

Amazon.com (NASDAQ:AMZN), which fell 1.4%, just announced an unprecedented deal to license content from HBO. That's right, HBO is licensing its content for web streaming -- a first for the legendary network. Amazon Prime members will have access to select, older HBO content, like "The Wire," "The Sopranos," and "Six Feet Under," among others. This helps justify Amazon's recent price hike for Prime members from $79 a year to $99/year. AOL also hopped on the streaming bandwagon today, saying it will feature Miramax films on its "AOL On Network" online channel.

This is getting to be one crowded stream, folks.

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John Divine owns shares of Apple and Google (C shares). You can follow him on Twitter, @divinebizkid, and on Motley Fool CAPS, @TMFDivine.

The Motley Fool recommends Amazon.com, Apple, Google (A and C shares), Home Depot, and Netflix and owns shares of Amazon.com, Apple, Google (A and C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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