Metaplatforms (NASDAQ: META) and Netflix (NASDAQ:NFLX) are two FAANG actions that seem so different. Meta is a social media company while Netflix is a video streamer that is in the business of binge-worthy video content. In the years to come, these two unlikely competitors could clash in the advertising arena, as both companies prepare to move beyond their original areas of expertise. Let’s use the TipRanks comparison tool to evaluate these two evolving FAANG plays to see which is the better bet for investors.
Meta and Netflix stocks aren’t that different
Meta is setting its sights on the metaverse as it continues to embrace video-based social media forms with Reels. Meanwhile, Netflix quietly rolled out its social media-like “Fast Laughs” clip feature. In fact, Meta is inching toward video, while Netflix has shown it’s open to incorporating aspects of social media into its app. Such moves suggest Meta and Netflix are poised to become more similar over time as they look to outgrow their original businesses.
Looking into the distant future, the similarities between the two companies could grow even more.
Meta seeks to be a leader in the metaverse (virtual reality world). Virtual reality is undoubtedly a hot topic when it comes to gaming. That’s one of the main reasons why Meta made a big bet on the Crayta gaming platform, which could help Meta improve his game (pardon the pun!).
Netflix has also embraced video games by adding an extensive list of free mobile games for its subscribers. The company is also reportedly looking to make its own game studio. Netflix CEO Reed Hastings isn’t messing around (again, pardon the pun) when it comes to Netflix’s video game expansion.
Meta is ready to go all out in your metaverse endeavors. While it may seem like Meta is 10 or 15 years ahead of the party, I think Meta’s new vision and deep pockets could bring the main metaverse closer than many expect. Indeed, dipping a toe into the waters of the metaverse would be wise, but it would limit a company’s ability to become a force to be reckoned with.
Right or wrong, Meta swings for the fences. With high reward potential comes high risk. Regardless, I think CEO Mark Zuckerberg is wise to reinvest his ample cash flows into futuristic initiatives rather than simply looking to return capital to shareholders in the form of dividends as social media apps face slow growth.
The main social media feature for Meta in the near future is Reels. So far, Meta has done a good job of replicating the success of TikTok. With such an extensive network, Meta can easily showcase the latest social networking features to its users.
It is this network alone that makes Meta a more enduring social media company that many give it credit for. Additionally, the company has a moat surrounding its older user base, Baby Boomers, who are less likely to be tempted by the newest trends and hottest platforms in the social space!
Aside from Reels, Meta really needs to continue to invest in their gaming capabilities. In fact, it’s going to be hard to be a metaverse favorite without some game studios in the books. Maybe it’s time for Meta to embark on a game acquisition spree or follow in Netflix’s footsteps and create a game studio for itself.
What is the target price for Meta Stock?
Wall Street loves Meta, with a “Moderate Buy” consensus rating based on 27 buys, five holds and two assigned sales in the past three months. The average price target for META shares is $220.76, suggesting a 58.7% rise over the next year. That’s a solid gain for the misunderstood stock.
Netflix’s gaming ambitions are clear, but skeptical analysts will note that the company is a little late to the party. Meta is also arguably late to the gaming party in front of other FAANG companies. In any case, Netflix is looking to make up for lost time as it seeks to offer more entertainment options for subscribers while adopting ads to make its services available to more consumers.
In previous articles, I noticed that very few Netflix subscribers were playing the games. As Netflix continues to invest in high-quality titles, I think it’s only a matter of time before Netflix becomes as much a gaming company as it is a streaming video.
With a cheaper ad-based tier, Netflix essentially allows budget-conscious consumers to get more for less. Recently, Netflix was affected by a series of updates to the ad-based model.
I think such updates are justified. Netflix is a premium entertainment service that could break into the advertising business of other low-cost (or free) forms of entertainment, such as social media.
What’s the prediction for Netflix stock?
Wall Street is muted on Netflix, with a “Hold” rating based on 10 buys, 16 holds, and five assigned sales in the past three months. NFLX’s average stock price target of $245.85 implies a meager 2.4% return. Indeed, there is a lot of uncertainty as Netflix pulls back the curtain on an ad-based level while continuing to dig deeper into gaming.
Conclusion: Wall Street expects more from META shares
Netflix and Meta are entertainment companies that will fight for limited consumer participation. As both companies pursue gaming while Netflix enters the advertising business, look for both companies to go head-to-head. At this juncture, Wall Street favors Meta over Netflix. I am inclined to agree. Meta is a much cheaper bet here.