According to a recent piece on Bloomberg, Netflix’s share price could benefit from a mild fall in the US economy. The logic is based on stay-at-home dynamics and fading competitors in tougher economic conditions. So, could Netflix actually be a recessionary play? The two key factors driving this view are outlined below.

Stay-at-home stock

The less money people have the more likely they are to stay home. This will mean that people will replace some of their going out expenditure with ‘stay-at-home’ expenditure. This will mean that the same forces that saw Netflix surge during covid due to the virus will encourage subscribers who want cut-price stay-at-home entertainment.

The competition may fade

The tighter monetary conditions will dissuade competitors like Disney and Paramount Global from investing to try and take subscribers away from Netflix. With fewer competitors and /or competitors competing less for market share Netflix can potentially gain more subscribers. Bloomberg reports that some of Netflix’s competitors are struggling at the moment.

The risk

The risk to this outlook is that unnecessary subscriptions are one of the first expenses that consumers are likely to cut back on. Netflix fell significantly in 2021, but there has been a decent bounce recently. If the US heads into a so-called ‘hard landing’ will that mean stocks like Netflix can still have another leg lower to come? The outlook is far from clear with the outlook for inflation, US growth, and the Fed rate path still uncertain.