Netflix stock should be avoided if lockdowns lift or a vaccine arrives, analyst says

Netflix recently changed its discounting policy from a one-month free trial in the U.S. and the U.K. to a 50% discount for the first two months.

DeGroote believes this was part of an effort to retain subscribers. “I would expect all the platform companies to be far more creative with their discounting over the next 12 to 18 months, as they try and strike a balance between critical mass, in terms of the subscriber base, and also frankly losing money,” he said.

“The reality is that for most streamers, these businesses are not yet profitable,” DeGroote added. “They won’t be profitable until they have subscriber bases of a certain size, paying a reliable monthly subscription. That’s probably a year down the line.”

Netflix shares have risen by more than 75% since March, which is when the coronavirus pandemic started to spread significantly in the West.

The company’s story has largely been about new subscriber growth but that may no longer be the case.

“In terms of Q3, the company has really quite skilfully guided down expectations,” said DeGroote. “The expectations over net new subs in Q3 are relatively low at about two and a half million so it is more about whether they can beat that number. For what it’s worth, I think they probably will.”

Patrick Armstrong, CIO of Plurimi Investment Managers, told CNBC’s “Squawk Box Europe” Tuesday that technology companies “are going to be winners in this environment.”

Disclosure: Peacock is the streaming service of NBCUniversal, parent company of CNBC.