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Is It the Right time to Buy Netflix ETFs?

Sweta Jaiswal, FRM

The coronavirus outbreak shows no signs of slowing down any time soon, with 32,149 confirmed cases in the United States and a death toll of 400. Also, the coronavirus-led market rout continues in the country. However, the online streaming giant Netflix, Inc. NFLX has gained 2.9% year to date, as against the S&P 500’s loss of 28.7%. As increasing number of people are spending time at home, in line with social-distancing guidelines due to the coronavirus pandemic, they are resorting to streaming for in-house entertainment. In this regard, Ted Sarandos, chief content officer at Netflix, has commented that the company is seeing an increase in online viewership. He also mentioned that Netflix currently has enough content to cater to the viewers over the next few months at the times when “physical production is not operational".

Notably, Netflix had delivered strong subscriber growth in fourth-quarter 2019. The company added 8.8 million new subscribers globally in the quarter, up 20% from the year-ago period and its own guidance of 7.6 million subscriber growth. Netflix added 420,000 subscribers in the United States versus the 600,000 guidance and 8.33 million internationally, up from the projected 7 million.

Moreover, on the competition front, the launch of Walt Disney's DIS streaming services, Disney+, in France has been postponed by a couple of weeks at the French government’s request. Also, the Mar 29 launch of Disney+ streaming service in India has been delayed, per a Reuters article.

ETFs in Focus

Against this backdrop, let’s take a look at some ETFs with a higher allocation to Netflix. We have highlighted them below:

Vanguard Communication Services ETF VOX)

This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 113 stocks in its basket, Netflix takes the fifth spot with 4.7% share. VOX has an AUM of $1.55 billion. It charges 10 bps in annual fees.

Invesco NASDAQ Internet ETF PNQI)

This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. It holds about 81 stocks with Netflix taking the top spot in its basket with 10.3% allocation. The product has an AUM of $408.9 million. It charges 62 bps in fees per year (read: Bull Market Turns 11: 5 ETF Winners).

MicroSectors FANG+ ETN FNGS)

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly-traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion with Netflix share coming in at 10%. The product has accumulated $28.1 million in its asset base within four months of debut and charges 58 basis points (bps) in annual fees (read: Earnings and Coronavirus Impact: 5 Best ETF Charts).

Invesco Dynamic Media ETF PBS)

This fund provides exposure to media stocks under one roof by tracking the Dynamic Media Intellidex Index. It holds 30 stocks in the basket with Netflix taking the second position at 6.4% allocation. The product has been able to manage $24.9 million in its asset base. It has 0.63% in expense ratio.

iShares Evolved U.S. Media and Entertainment ETF IEME)

This newly actively managed ETF employs data science techniques to identify companies with exposure to the media and entertainment sector. Holding 88 stocks in its basket, Netflix occupies the first position in the basket with 7.7% share. The fund has accumulated $4.5 million in its asset base and charges 18 bps in annual fees (read: ETFs to Ride on Rising Gaming Fervor Amid Coronavirus Scare).

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The Walt Disney Company (DIS) : Free Stock Analysis Report
 
Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
Invesco Dynamic Media ETF (PBS): ETF Research Reports
 
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
 
Vanguard Communication Services ETF (VOX): ETF Research Reports
 
iShares Evolved U.S. Media and Entertainment ETF (IEME): ETF Research Reports
 
MICRS-FANG+ (FNGS): ETF Research Reports
 
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