Why Netflix Should Replace Tesla in the "Magnificent Seven"
In This Article:
Key Points
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Tesla has been a huge winner for investors over the long haul, but the business is dealing with notable issues these days.
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Netflix continues to report double-digit percentage revenue growth and impressive profitability as it leads the streaming industry.
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The "Magnificent Seven" isn’t an official index, but Netflix deserves to be included over the EV maker.
Looking back over the past decade and beyond, I don't think there are many folks out there who would deny just how impressive Tesla's success has been. This innovative business, led by polarizing CEO Elon Musk, disrupted the global auto industry with its electric vehicles (EVs).
While the EV stock trades 32% below its peak (as of June 10), that's still a gain of 1,810% in the past 10 years. That long-term performance made it one of the world's largest tech companies, which is why Bank of America analyst Michael Hartnett gave it a spot in the "Magnificent Seven" when he introduced the idea of the group in 2023. However, I think it's time to swap the EV maker out of this unofficial grouping and replace it with the more-deserving Netflix (NASDAQ: NFLX).
Tesla's struggles are hard to ignore
Over the years, Tesla shareholders grew used to seeing the company register jaw-dropping sales growth. The picture isn't so rosy anymore, though. Its automotive revenue declined 20% year over year in Q1. In 2024, it reported its first-ever year-over-year drop in deliveries. And the company's profitability has continued to slide as higher interest rates and a more competitive environment have put downward pressure on demand for its vehicles.
Musk's push in the political arena might at first have been viewed positively by some investors, as he was positioning himself to have more influence in Washington, D.C., which could have benefited Tesla from a regulatory perspective. But both his time in President Donald Trump's inner circle and his more recent exit from politics, as well as his highly public spat with Trump, have been huge distractions that have certainly damaged Tesla's brand instead.
It's safe to say that a company that was once in the fast lane is now stuck in traffic. Tesla will have a lot of work to do in order to get back to its prior glory.
Netflix just keeps winning
While Tesla faces a battle to get itself back on track, Netflix continues to flourish. The streaming stock is up 1,200% in the last decade. The company added 41 million net new customers in 2024, bringing its total to nearly 302 million at year's end. While Netflix chose to stop publicly reporting the number of subscribers it has starting this year, it did increase revenue by 12.5% year over year in the first quarter.