The parent companies of Netflix Inc and Alphabet Inc-CL C, the world's largest streaming companies, together with Facebook Inc, Apple Inc and Amazon.Com Inc, have formed FAANG, the top technology giant in the US industry. Like the other three companies, Netflix Inc and Alphabet have subverted people's perception of traditional industry markets and greatly changed people's way of life.

At present, Netflix Inc has changed the market pattern of video rental and pay-TV greatly by changing his online-based DVD rental service to streaming media platform service. Alphabet Inc-CL C's core search platform has become synonymous with online search; coincidentally, products such as Youtube, Gmail, Android and Chrome also occupy their respective markets.

Netflix Inc's share price has risen nearly 400% in the past five years, while Alphabet's share price has also risen 130%. So the question is, why does Netflix Inc's share price have such a huge advantage over Alphabet? Will this trend continue?

Analysis of the revenue of Netflix Inc and Alphabet

All of Netflix Inc's current income comes from subscriptions paid by his users, which vary according to the resolution of the relevant videos and the number of devices supported. Netflix Inc currently provides streaming services in more than 190 countries around the world and has created extensive and specific localized content for overseas markets.

Alphabet generated 83 per cent of its revenue last year from Alphabet Inc-CL C's core advertising business, about 6 per cent from Alphabet Inc-CL C's cloud services, and the remaining 11 per cent from Alphabet Inc-CL C's other products-including hardware and Youtube subscriptions.

Netflix Inc growth: "make a fortune Youdao, Inc"

Netflix Inc's revenue grew 31% in 2019 and reached $11.9 billion in the first half of 2020, up 26% from a year earlier. In the first half of this year, Netflix Inc's total number of global paying users reached 192.95 million, an increase of 23% over the same period last year, indicating that Netflix Inc did not cede the market to new market challengers such as Disney+ who entered the market track in the increasingly fierce market competition.

Netflix Inc's net profit rose 54 per cent in 2019 and reached $1.43 billion in the first half of 2020, up 133 per cent from a year earlier. Netflix Inc attributed the strong profit growth trend to an increase in subscription revenue, a reduction in operating expenses and related expenses related to delays in spending during public health events.

In fact, the public health incident did not have a substantial negative impact on Netflix Inc's original content production. On the contrary, when more people were forced to stay at home because of health travel quarantine control, Netflix Inc's subscription rate and interaction rate were improved very reasonably. Netflix Inc now expects third-quarter revenue to grow 21 per cent year-on-year, paying users to grow 23 per cent and net profit to grow 43 per cent.

Wall Street expects Netflix Inc's full-year revenue and profit to grow by 23% and 50%, respectively, indicating that the company's stock price-to-earnings ratio of about 55 times forward earnings is still within a reasonable level. Analysts believe Netflix Inc's strong growth momentum will continue next year, with revenue growing by 17 per cent and profits by 42 per cent.

AlphabetGrowth: "against the wind"

Alphabet's revenue grew 18% in 2019, but the company now grew only 6% year-on-year to $79.5 billion in the first half of 2020, due to a sharp drop in Alphabet Inc-CL C's advertising sales throughout the public health incident. The growth of Google Cloud and Alphabet Inc-CL C's "other" businesses partly offset the negative impact of the slowdown in advertising sales, but these businesses generate revenue margins that are much lower than those generated by Alphabet's core advertising business.

Alphabet's net profit increased by 12% in 2019, but the company's net profit fell 17% year-on-year to $13.8 billion in the first half of 2020, mainly due to the huge loss of the company's higher-margin advertising revenue as a result of public health events, as well as the increase in operating expenses related to public health incident security measures and the costs of YouTube's continued expansion.

Wall Street expects Alphabet's full-year revenue to grow by 7 per cent, but expects profits to fall by 10 per cent. Alphabet shares are trading at about 25 times forward earnings, which doesn't look good to investors, but analysts expect Alphabet's revenue and profit to grow 21% and 28% respectively in 2021 as public health issues fade and the company's advertising business recovers.

While investors are gratified by this prospect, investors should also be aware that Alphabet is still potentially threatened by antitrust cases because of its dominance in online search and advertising. But Netflix Inc did not face any similar problems.

Netflix Inc: "take the lead"

Both Netflix and Alphabet are reliable long-term investment options for investors, but Netflix Inc is obviously more attractive to investors at the moment. Netflix Inc produced a stronger income and profit growth trend during the public health incident, while the basic nature of Netflix Inc's business better avoided the negative impact of public health events. at the same time, it is not potentially threatened by antitrust regulators. Although Netflix Inc's current stock price is not cheap, Netflix Inc's advantage has proved that his stock premium is reasonable.