Netflix Or Amazon: Which One Is A Better Pick Right Now? Bob Peck Answers

After reporting phenomenal second-quarter numbers, Netflix, Inc.NFLX and Amazon.com, Inc. AMZN turned out to be among the best performing stocks on the Nasdaq for July. Robert 'Bob' Peck, SunTrust Robinson Humphrey analyst, was on CNBC Monday to discuss the outlook for these stocks going forward and to discuss which one is a better pick among them.

The Way Ahead

"For Netflix, it continues to grow its strong base with increasing pricing as well," Peck began. "For Amazon, it's growing its strong core profitably as well as [...] in its cloud service. So, both have had strong fundamentals justifying their movements."

Challenges

On what challenges do both these companies face going forward, Peck said, "On the Netflix side the cost of acquiring customers has been going up consistently, that's a risk. Further content obligations, Netflix has over $7 billion of obligations on content and...on valuations Netflix trades at about 100 times EBITDA this year, 75 times forward and 50 times 2017. So, a lot of [things] baked in there."

He continued, "On Amazon, you want to see continued expansion of AWS, their cloud product particularly profitably. So, I think, the risk there would be any sort of pricing pressure that can maybe squeeze that profits and at 70 times free cash flow, it's not particularly cheap."

Picky On Valuations

Peck was asked which stock among Netflix and Amazon does he likes more. He replied, "Well we love both companies, we haven't been recommending both stocks to investors right now because of these valuation parameters. Should we see a pullback in the valuation, we think, it's pretty interesting both of them have long secular winds at their back are fantastic companies. So, it's more just being picky on valuations."