Before getting started, let's get one thing clear: we can't really have a stock face-off between Netflix and HBO. HBO is a subsidiary of Time Warner , along with a host of other content producers: TBS, Warner Brothers, and CNN, to name a few. But make no mistake about it: HBO is a crucial part of Time Warner's empire. And as the world of content delivery changes before our eyes, HBO could be one of the most important pieces of Time Warner's future.
Both Netflix and Time Warner benefit from two huge moats: the strength of their brands, expensive original content, and growing user bases. While Netflix got its start by mailing DVDs, the company has successfully -- with a few bumps along the way -- made the transition to streaming. In fact, a 2016 study found that Netflix was one of the top three most loved brands in the U.S., U.K., and Brazil.
The company also has 94 million subscribers worldwide -- a number that only continues to grow. Netflix hooks people in with original content like Orange is the New Black or House of Cards, keeps them there by keeping prices as low as $8 per month, and benefits from the fact that for most people, paying the Netflix bill is a set-it-and-forget-it routine.
On another side, HBO accounts for just 20% of the company's revenue. Turner Broadcasting -- the rest of the cable channels -- and Warner Brothers account for the rest. While there's no doubt that these are strong brands, the move toward cord-cutting could offer a serious threat to 80% of Time Warner's revenues.
Therefore, my vote goes to Netflix.
In light of the Netflix earnings yesterday and the subsequent stock pop, I still fail to understand why people are so hot on Netflix stock.
Currently, Netflix is valued at $50b and time warner (parent of HBO) is valued at $75b. HBO has more penetration (currently) and just flat out better content. Netflix has better technology but i don’t think much difference to consumers in the long run.
Take a look at its price now. The market has been flat since your OP but Netflix has gone up a lot.
HBO is a dinosaur. They are having trouble adapting in the streaming marketplace. They have a lot of work to do to adapt their business model.
First, it's always about growth. Netflix might be overvalued, but it is definitely growing faster than HBO which is only a part of a very steady empire. People like growth stocks.
Second, if TW spun off HBO, sure you could put your money in HBO. But right now, you're putting money into the gazillion things on that list you linked to, and a lot of investors don't like that. Netflix's business is simple to understand. Their growth rate is simple to see. Just TW movie studios can kill any profit HBO generates in a bad year.
To be honest, neither one of these companies is in a particularly enviable position. Netflix is losing cash flow hand over fist thanks to its growth initiatives, while Time Warner has a ton of debt on hand relative to its cash position.
They're both in bad shape, but equally bad shape, making this a tie.
If I had to bet, I'd say both will be very well established and healthy 10 years from now and well positioned for when cable declines in importance.
My issue is with the current valuation of NFLX. And from what I see, I think it's bonkers compared to HBO's parent, TWC.