Entertainment stocks such as Netflix (NFLX), Paramount Global (PARA) and Walt Disney Co. (DIS) are slumping amid concerns that escalating trade tensions between the U.S. and Canada could hurt Hollywood film and television productions.
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Known as “Hollywood North,” Canada has long been a hotbed for entertainment productions with many American film and television series filmed in Canadian cities such as Vancouver and Toronto, as well as in scenic locations such as Banff National Park and along the East Coast of Nova Scotia.
Hollywood studios also take advantage of a favorable U.S.-Canada exchange rate and generous tax incentives provided by the Canadian government to film movies and TV programs north of the border. Over more than 30 years, Canada has developed a top-notch workforce of industry talent in front of and behind the camera that makes Hollywood productions run smoothly and on budget.
Industry Blow
But now, there are concerns that the status quo could be upended by escalating trade tensions between the U.S. and Canada, dealing another blow to entertainment companies as they recover from the impacts of the Covid-19 pandemic and a months long strike by Hollywood actors and writers.
Some executives in Hollywood are worrying aloud that a heightened trade war with Canada could lead America’s northern neighbor to retaliate in ways that would hurt film production, potentially rescinding generous tax credits or closing Canadian soundstages to U.S. studios.
In recent days, Trump announced 25% tariffs on most imported goods from Canada. Officials in Ottawa have responded by announcing retaliatory tit-for-tat tariffs. Canadian Prime Minister Justin Trudeau has said that “all options” are on the table as the country grapples with the U.S. tariffs. Shares of NFLX, PARA, and DIS are each down about 1% on Feb. 3.
Is NFLX Stock a Buy?
The stock of Netflix has a consensus Moderate Buy rating among 39 Wall Street analysts. That rating is based on 28 Buy, 10 Hold, and one Sell recommendations assigned in the last three months. The average NFLX price target of $1,103.53 implies 12.43% upside from current levels.
