Surprisingly, when it comes to these comparisons, the Nasdaq is very comparable to Netflix. Over the last 18 months, FAANG stocks and other IT behemoths have outperformed the market as a whole. As a result, a tiny number of stocks now account for more than ever before in the index. The Invesco QQQ Trust’s top ten holdings account for roughly 57 percent of the overall portfolio, with Netflix accounting for about 2% of the total.
Nearly two-thirds of the index is made up of technology stocks. As a result, the Nasdaq 100’s sales growth rates are relatively strong. Amazon, Apple, Alphabet, Microsoft, Meta Platforms, Nvidia, and Tesla are all growing faster than Netflix and driving the Nasdaq upward. It’s difficult to justify reduced diversification without the benefit of larger growth potential.
Netflix is riskier to purchase than a Nasdaq index fund. Netflix operates in a highly competitive market, and it must constantly demonstrate value to customers who can cancel at any time. As a result, content development is a significant investment, with a gross margin of only 45 percent year to date. That’s low in comparison to peers, and it’s unlikely to improve in the future because Netflix competes on price and quality, squeezing margins. Regardless, the stock’s forward P/E ratio is higher than 50. Based on a 15 percent -18 percent expected growth rate, this indicates a high P/E-to-growth ratio of roughly three. Even after accounting for predicted growth, the stock is still extremely pricey. Despite its lean toward large-cap tech stocks, the Nasdaq 100’s weighted average P/E ratio is only at 35. The index has more space to fall than Netflix.
These processes are being observed in real time. Since its inception, Netflix has consistently outperformed the Invesco QQQ Trust, although that lead has dwindled in recent years. Over the last three years, their returns have been roughly comparable.
Which ETF includes both Amazon and Apple?
Apple, Microsoft, Amazon, Facebook, Netflix, Alphabet, Tesla, Berkshire Hathaway, JP Morgan Chase, and Johnson & Johnson are among the top holdings in the SPDR S&P 500 Trust ETF (SPY).
Is Netflix owned by Vanguard Group?
Leslie J. Kilgore, David Hyman, Greg Peters, Capital Research Group Investors, Vanguard Group Inc., and BlackRock Inc. are among Netflix’s major shareholders (BLK).
Is QQQ the finest exchange-traded fund?
The Nasdaq-100 Index-tracking Invesco QQQ ETF is among the top one percent of large-cap growth ETFs. Since its inception in 1999, QQQ has been a persistent outperformer, routinely outperforming the S&P 500 Index.