Bank Of America Thinks Netflix Will Be Just Fine Following Apple TV+ Entrance

Apple Inc. AAPL will enter the streaming video space and Netflix, Inc. NFLX investors have little reason to be concerned, according to Bank Of America.

The Analyst

Bank of America's Nat Schindler maintains a Buy rating on Netflix with an unchanged $450 price target.

The Thesis

Apple's new streaming video ambitions are meant to be an alternative to traditional cable TV within a highly fragmented market, Schindler said in a research report. As such, a new entrant in the market is unlikely to negatively impact Netflix's subscriber growth.

Apple boasts 1.4 billion users globally across all devices but this isn't enough to guarantee market share. Apple Music has around 50 million subscribers, which is "much less" than Spotify Technology SA SPOT. The same scenario is likely to play out on the streaming video space given Netflix's revenue represents around 70 percent of the total U.S. subscription streaming video market.

Schindler said the more likely impact from Apple's entrance will be felt by smaller and more traditional streaming video companies. These companies have less resources to compete against Apple's reported $1-$2 billion investment in content and Netflix's content to spend of $8-$9 billion.

Bottom line, there's little reason to see Apple becoming the "base subscription package for everyday consumers" in the near term although content competition could be a concern over the longer-term. Netflix's popularity goes beyond its consumer appeal, headlining hired.com's list of top global employer brands.

Price Action

Netflix's stock is trading lower by about 1 percent at $362.37 per share Tuesday morning.

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Photo credit: Matthew Keys, Flickr