Please ensure Javascript is enabled for purposes of website accessibility

1 Stock to Buy If the Coronavirus-Driven Sell-Off Gets Worse

By Harsh Chauhan - Mar 5, 2020 at 11:45AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This streaming specialist may see a surge in subscribers if the outbreak worsens.

While the broader stock market has been sent packing in recent weeks on account of the novel coronavirus outbreak that threatens to derail the earnings growth of several companies, Netflix (NFLX -1.58%) has bucked the trend. Shares of the streaming giant have easily outperformed the S&P 500 so far this year, which might seem surprising as other tech stocks have been rattled by the potential financial implications of the COVID-19 virus.

Netflix's immunity to the COVID-19 outbreak, however, is not surprising. There are a few simple reasons why Netflix's growth won't be hampered by the epidemic.

NFLX Chart

NFLX data by YCharts

Netflix helps subscribers avoid public spaces

Netflix provides a service that doesn't require its consumers to get out of the house, thereby minimizing the risk of contracting the virus.

According to the Centers for Disease Control and Prevention (CDC), the COVID-19 virus can be transmitted "between people who are in close contact with one another (within about 6 feet)."

The CDC also points out that "respiratory droplets produced when an infected person coughs or sneezes" also spread the disease. So, anyone looking to go to a movie theater in a novel coronavirus-infected area may be at a greater risk of contracting the virus.

Not surprisingly, a recent survey of 2,200 adults carried out by Morning Consult has found that 62% of the respondents are likely to avoid going out for movies, theater performances, and amusement parks. Meanwhile, 63% of the respondents said that they are less likely to go to concerts.

Such behavior is already being seen in China, where box office collections are down nearly $2 billion in the first two months of 2020 over the prior-year period, as theaters have remained shut. This creates an ideal situation for Netflix to gain subscribers, as people might be willing to avoid public spaces.

Person trading stocks on a smartphone.

Image Source: Getty Images.

Some more reasons to be bullish

Another reason to be bullish about Netflix is its global presence. The streaming specialist serves 190 countries out of a total of 195, and that excludes China. This gives Netflix a two-fold advantage.

First, the streaming company is not reliant on China for any of its revenue. Second, Netflix's global presence could bring more users into its fold as news of new cases could force people to stay indoors.

The death toll of the COVID-19 virus has increased to nearly 3,200 as of March 3, while the number of confirmed cases is more than 93,000. The virus seems to be spreading at an alarming rate, as the death toll stood at 2,900 as of Feb. 28, while the number of confirmed cases stood at 85,000.

With the novel coronavirus spreading to 77 countries apart from China, the fear of contracting the disease may help turn more people toward Netflix for their dose of entertainment at home. As such, there is a chance of Netflix's international growth picking up pace in the coming months.

The company is already doing well as its global subscriber additions beat estimates in the fourth quarter of 2019. Netflix added 8.33 million paid subscribers internationally during the period, compared to the Wall Street forecast of 7.17 million.

However, its first quarter forecast wasn't up to the mark. Netflix anticipates the addition of 7 million paid subscribers this quarter as compared to the consensus estimate of 7.86 million.

But there is a chance of Netflix beating its guidance if more people turn to the streaming service as they avoid going to public gatherings in light of the COVID-19 spread. In India, for instance, Prime Minister Narendra Modi has indirectly advised people to avoid mass gatherings on festivals to avoid the spread of the novel coronavirus.

This could create an ideal situation for Netflix to score more subscribers in India, a market in which it has been targeting its next 100 million subscribers.

So, there are quite a few reasons to believe that Netflix may turn out to be an antidote to the novel coronavirus-driven stock market crash.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Netflix, Inc. Stock Quote
Netflix, Inc.
$187.84 (-1.58%) $-3.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.