Netflix Challenges Tesla's Spot in the Big Seven Tech Titans Showdown
1min read With the arrival of the third-quarter earnings season, Wall Street is reassessing the lineup of the "Big Seven" technology companies. Despite Tesla's impressive latest earnings, its position within this group is under scrutiny, while Netflix emerges as a potential contender with its robust financial performance.
Netflix's rise in recent years has been noteworthy. In 2023, its free cash flow soared to $6.93 billion, a significant jump from $1.62 billion in 2022. In the third quarter alone, Netflix achieved $2.19 billion in free cash flow, surpassing $1.89 billion from the same period last year. Analysts predict that Netflix's free cash flow will grow to $8.9 billion by 2025 and further to $11.16 billion by 2026. This continuous cash flow strength has been a catalyst for its stock price, which has risen by 61.08% since the start of the year, trailing only behind Nvidia and Meta.
In contrast, while Tesla achieved a 17% profit growth in the third quarter, concerns about its fundamentals being overhyped persist. Tesla's forward P/E ratio stands at about 73, significantly higher than other Big Seven members. Some market experts liken Tesla's trading patterns to Bitcoin, driven more by "hope and dreams" than solid fundamentals. Despite CEO Elon Musk's portrayal of Tesla as a tech company, its core business remains automobile manufacturing, which fundamentally distinguishes it from traditional tech giants.
The "Big Seven" have long dominated the U.S. stock market, comprising Nvidia, Apple, Alphabet, Amazon, Meta, Microsoft, and Tesla. However, this composition is now facing reevaluation amid changing market dynamics. Analysts highlight that being part of the Big Seven hinges on becoming a "cash flow machine," a criterion Netflix appears to meet more convincingly.
It's noteworthy that 87% of analysts rate Netflix as a buy, whereas only over 40% hold the same view for Tesla. This discrepancy underscores differing market expectations for the two companies' future trajectories. As Netflix continues to invest in content production and user growth, its position among the Big Seven may become increasingly secure.
The assessment of the Big Seven is undergoing a significant reevaluation. Netflix, with its strong financial results and growth prospects, is challenging Tesla's standing. Regardless of the outcome, this contest will have profound implications for the tech sector and investors. In such a rapidly evolving market, investors need to keenly observe these tech giants' performances to make informed investment decisions.
