Looking back over the past decade and beyond, I donât think there are many folks out there who would deny just how impressive Teslaâs 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), thatâs still a gain of 1,810% in the past 10 years. That long-term performance made it one of the worldâs largest tech companies, which is why Bank of America analyst Michael Hartnett gave it a spot in the âMagnificent Sevenâ when he introduced the idea of the group in 2023. However, I think itâs time to swap the EV maker out of this unofficial grouping and replace it with the more-deserving Netflix (NFLX -0.35%).
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Teslaâs struggles are hard to ignore
Over the years, Tesla shareholders grew used to seeing the company register jaw-dropping sales growth. The picture isnât 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 companyâs profitability has continued to slide as higher interest rates and a more competitive environment have put downward pressure on demand for its vehicles.
Muskâs 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 Trumpâs 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 Teslaâs brand instead.
Itâs 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 yearâs 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.
It might seem like this streaming platform has saturated its market. However, co-CEO Greg Peters believes there are still âhundreds of millions of folks to sign up.â By continuing to focus on creating compelling content offerings all over the world, Netflix is in a position to keep its expansion going. Wall Streetâs consensus analyst estimates are for its revenue to rise at a compound annual rate of 12.3% between 2024 and 2027.
The streaming industry, like the automotive market, is extremely competitive. Netflix co-founder and former CEO Reed Hastings previously said that he counts sleep among the companyâs key competitors. I donât believe this was a stretch. Netflix goes up against all the other activities consumers can do when itâs time to wind down and relax.
But to be more specific, people have an almost unlimited number of viewing options at their fingertips today. Netflix is in the lead, though. Data from Nielsen shows that Netflix commanded 7.5% of video viewing time in the U.S. in April, only behind YouTube, which isnât necessarily an apples-to-apples comparison due to the latter largely featuring user-generated content.
With its massive subscriber base, and trailing 12-month revenue of $40 billion, Netflix has the financial strength to spend a lot on content and marketing. And itâs still able to bring in billions in free cash flow each year.
Itâs important to highlight that the âMagnificent Sevenâ is not an official index like the S&P 500 is. However, with each passing quarter, Netflix continues to make the case that it deserves to be mentioned with the tech giants in that group. Given the streaming pioneerâs ongoing success, it belongs in that exclusive club instead of Tesla.
Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Tesla. The Motley Fool has a disclosure policy.
