Hooking Up or Locking Down, Netflix Poised to Win Either Way

(Bloomberg) -- Wall Street investors are coming around to the idea that whether the pandemic fades soon or the stay-at-home economy persists, either way Netflix Inc. is poised to gain.

Shares of the video streaming company surged the most in two years Wednesday, helping lift the Invesco Dynamic Media exchange-traded fund to a record and sending the iShares Evolved U.S. Media and Entertainment ETF to the highest since February.

Netflix and stocks such as Microsoft Corp., Electronic Arts Inc. and Zoom Video Communications Inc. are well known by now to have benefited from the coronavirus lockdowns that kept people at home with nothing to do except stare at screens. But money managers say Netflix is still well positioned if there’s an easing in restrictions that would allow more people to couple up, stay in and watch movies together, a phenomenon associated with fall and winter called cuffing season.

“They are in a win-win situation right now,” said Nick Licouris, an investment adviser at wealth manager Gerber Kawasaki in Santa Monica, California, which owned more than 12,000 Netflix shares as of the end of June. “Streaming is king in the Covid-stay-at-home environment. Netflix has proven to be the leader in content creation and getting subscriber growth.”

Progress on a vaccine and fewer reported cases of the virus also means Hollywood can more safely resume large-scale production, creating fresh content for streaming services that have had to rotate stale content for the past few months.

That would be a boon as colder weather and the resumption of college classes send single people looking for short-term relationships to pass the season, a trend that tends to boost video streaming later in the year.

“It makes sense that the industry is rallying a little bit here,” Keith Gangl, a portfolio manager at Gradient Investments, said in an interview. “We’re kind of getting back into that nesting phase of going back indoors.”

©2020 Bloomberg L.P.