Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) have been two of the best-performing stocks of the decade. The streaming titan has returned a whopping 3,600% over the last ten years, while the e-commerce giant is up 1,260%. Not too shabby.

However, the two companies' reliable streak of beating the market may be coming to an end. While both stocks are up year-to-date, they are both trailing the S&P 500, a sign that these stocks may not be the surefire winners they have been over the last ten years, especially as both are facing new sets of challenges. Alternatively, this year's modest performance could just be a speed bump on the way to greater gains next year, as we've seen similar pauses in these stocks' growth before.

Let's take a look at what the streaming titan and the e-commerce giant have to offer investors today in order to determine where they're going from here and which is the better buy.

A trail in the woods parting into two separate roads

Image source: Getty Images.

The streaming landscape is changing

Netflix rose to dominate the streaming landscape in the 2010s, and the entertainment giant has been largely unchallenged in its direct-to-consumer model. Though Netflix has faced off against Hulu and Amazon Prime for a long time, none of its challengers have poured the kind of resources into content and distribution that Netflix has.

The service has been available globally for nearly four years, with a few exceptions, and in 2019 the company is expected to spend about $15 billion on a cash basis, which includes a parade of Oscar bait like The Irishman and Marriage Story. Netflix has also taken on considerable debt to fund its content binge and operated with negative free cash flow.

However, the biggest change for Netflix going forward is in the competitive field. Both Disney and Apple launched their own streaming services in November, and HBOMax from AT&T and NBCUniversal's Peacock are both set to debut streams next spring. In other words, competition for the consumer's dollar is going to be a lot tighter. Disney+ wowed investors when it announced 10 million sign-ups on opening day, which includes pre-sales. That service, which at $6.99/month costs a little more than half the standard Netflix package, seems likely to be Netflix's biggest challenger. 

Though consumers can and will sign up for more than one service, the question isn't just if new competition will take away eyeballs from Netflix, but if it will prevent the leading streamer from passing along future price increases and drive up costs for content, as many of these shows and movies go to the highest bidder. 

Netflix stock is still expensive at a price-to-earnings ratio of around 100, meaning any unanticipated slowdown in subscriber growth or profits could send the stock reeling. So far, early data shows Netflix has seen "little to no impact" from the Disney+ launch, according to Credit Suisse. If that pattern continues, Netflix shares could gain, but the downside potential is clearly there.

A tech giant always innovating

Dubbed "The Everything Store", a better name for Amazon these days may be "The Everything Company". The tech giant has made inroads into a wide variety of businesses beyond e-commerce, including cloud computing, voice-activated technology, healthcare, logistics, cashierless stores, and other areas. 

In the past year alone, Amazon has accelerated its two-day delivery speed with Prime to just one day, announced plans for its own Amazon-branded supermarket chain, and launched a pilot healthcare service, called Amazon Care, that uses both virtual and in-person care to improve on traditional healthcare.

Guided by its mission to be Earth's most customer-centric company, Amazon continues to make improvements to win over new customers and expand its business with existing ones. The one-day shipping program, for instance, is expected to cost $1.5 billion in the fourth quarter, but it's sure to be a winner during the holiday season when speed is especially important for gift-givers, who appreciate fast delivery and the convenience of shopping from home.   

Amazon's profits have taken a hit as a result of that move and investments in Amazon Web Services, its other core profit driver, but those decisions are likely to drive its revenue higher over the long term, especially as cloud computing is taking over the IT industry and e-commerce is carving out greater market share from traditional retail.

The opportunity in those two markets and areas like healthcare, where Amazon is still testing entry points, should fuel the company's growth for the foreseeable future. Like Netflix, the stock is also expensive, trading at a price-to-earnings ratio at 80, meaning high expectations are baked in.

Which is the better buy?

Both Netflix and Amazon are expensive, high-growth stocks. Though Netflix has been the slightly better performer in recent years, the new wave of competition the company is facing presents a unique risk. Amazon, on the other hand, seems to have more competitive advantages, as the company's Prime membership program and reputation with customers should help drive long-term growth and also protect it from a recession. Amazon also seems to have more optionality than Netflix, meaning the company has the potential to develop entirely new business lines, which helps justify its high valuation -- Amazon could have a brand new profit stream five years from now.

Based on its unique competitive advantages, accumulated customer trust (which gives it an advantage in new businesses), and willingness to experiment, Amazon looks like the better buy. Netflix could also continue to beat the market over the coming years, but the streamer simply faces more challenges than its e-commerce peer.