Wall Street started the session Tuesday morning in a modestly good mood, as some positive comments on the status of trade negotiations between the U.S. and China helped improve sentiment among market participants. Investors have generally looked for even the smallest bit of good news on the trade front as a reason for general optimism about the stock market's prospects, and today was no different. But early gains proved fleeting, and as of 11 a.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 16 points to 27,893. The S&P 500 (SNPINDEX:^GSPC) climbed 2 points to 3,138, and the Nasdaq Composite (NASDAQINDEX:^IXIC) picked up 12 points to 8,634.
Among popular stocks, the mood was more mixed. Netflix (NASDAQ:NFLX) has some investors worried about the rising competition it's facing in the video-streaming industry. However, Tesla (NASDAQ:TSLA) managed to get past some recent controversies to earn positive comments from analysts.
Will competing streamers hurt Netflix?
Shares of Netflix dropped 2% after the streaming video specialist faced negative comments from Wall Street analysts. Needham decided to downgrade the stock from hold to underperform, with dire projections about Netflix's immediate future prospects.
In particular, Needham believes that Netflix could see subscriber counts fall by 4 million in the U.S. market during 2020, citing the company's premium pricing of $9 to $16 per month as being well above what new entrants to the industry are charging. With most competing services having picked price points closer to the $5-$7 monthly range, the fear is that viewers will jump ship to rival services, especially during promotional periods offering discounts.
Moreover, Netflix hasn't yet addressed a key longer-term question: whether to start including advertising in its streaming service. That could be a dangerous move if it alienates viewers, but it could be the best way to lower monthly subscription costs while still sustaining current levels of revenue.
The next year will bring a lot of changes to the streaming world. Netflix will have to work hard to ensure it doesn't lose its leadership position in the industry.
A vote of confidence for Tesla
Shares of Tesla gained almost 3% after the electric vehicle manufacturer received favorable comments from analysts. Coming in the wake of a tough week for the automaker, Tesla investors appreciated the upbeat news.
Analysts at Exane BNP Paribas kept their outperform rating on Tesla stock, boosting their price target by $100 to a new level of $400 per share. The move comes just a couple months after Exane initiated coverage of Tesla with a $300 price target, which at the time was well above where the depressed stock was trading.
Despite recent events like an accident involving its Autopilot system and the shattered-window incident with the new Cybertruck, Tesla remains the go-to standard for electric vehicles in the U.S. and many places across the globe. With advantages in areas like range, charging time, and ancillary services, Tesla has driven strong customer loyalty even at relatively high price points.
Tesla will remain a contentious stock, with ardent supporters and detractors. However, if the automaker can keep ramping up production and sales volumes while catering to an expanding set of consumers, then it could justify its lofty stock price -- and the even loftier price targets that some analysts have put on the shares.