The novel coronavirus pandemic has resulted in millions of people stuck at home in quarantine. Social distancing is in full effect, which means no going out for entertainment. In turn, TV and streaming have become the most important device in many homes. Netflix (NASDAQ:NFLX) added 15.8 million new subscribers in the last quarter, but traditional television companies are making big moves as well.
And because of this, TV stocks are thriving.
“Networks have definitely benefited,” wrote Les Rose, professor of Broadcast and Digital Journalism at Syracuse University’s Newhouse School, in an email to InvestorPlace. “Ratings are up across the board, partly because viewers want information, and partly because viewers have little else to do. Fox just recorded its best-ever ratings quarter, and CNN has seen viewership nearly double since last year.”
With that in mind, here are three traditional companies to keep an eye on:
One of these traditional TV names is making a big move to take on Netflix in the video streaming war. Meanwhile, one faces a big challenge directly caused by the coronavirus pandemic, and could feel the effects for months. And another one is set to reap the benefits of an election year.
That said, let’s take a deeper dive into all three TV stocks.
Hot TV Stocks: Disney (DIS)
DIS stock has had a rough ride as a result of the coronavirus pandemic. There have been positives — Disney+ streaming subscribers have doubled in this time — but those have been more than offset by negatives. Movie releases like Onward faced empty theaters and were forced to go straight to digital. Additionally, its theme parks have been shuttered across the world.
One of the other big factors that needs to watched carefully when considering DIS stock is ESPN. InvestorPlace contributor Vince Martin was warning about a decline in ESPN viewership hurting Disney back in 2018. At that point, its contribution to Disney was pegged at $10.2 billion per year — 17% of total revenue in 2018 for DIS.
Moreover, the coronavirus pandemic has resulted in sporting events coming to a crashing halt across the globe. Professional leagues have stopped playing, and the NCAA March Madness basketball tournament was an early cancellation victim. ESPN has been filling its schedule with sports news and broadcasts of archived games and events, but subscribers are only going to pay for this content for so long. And advertisers certainly aren’t going to fork over the same rates.
So with the potential that sports won’t resume until the fall, that ESPN drag on DIS stock is going to be an even bigger factor through much of 2020.
Comcast owns NBC, and that has put it in the spotlight in recent weeks with the launch of its answer to Netflix. Peacock launched on April 15 in a “sneak peek” form for Comcast cable customers, but it will be rolling out fully across the U.S. in July.
Peacock will include original programming (most of which comes starting in 2021), but the service is creating buzz thanks to exclusive access to popular NBC shows like The Office — which Peacock won from Netflix. It also includes Universal and Dreamworks Animation movies.
With streaming video getting a huge boost during the coronavirus lockdown, Comcast stands to sign up subscribers en masse. Wedbush noted:
“In this COVID-19 streaming friendly environment, this is a good time in our opinion for Peacock and its massive 15,000 hours of content to garner subscribers as consumers are in an unprecedented lockdown mode globally.”
And while NBC is hoping for 30-35 million active subscriptions by 2024, Wedbush analysts think that with the coronavirus effect boosting streaming popularity, 20-25 million subscriptions over the next 12-18 months is achievable.
CMCSA has popped more than 10% so far in April, and a lot of that can be attributed to the anticipation around Peacock.
Nexstar Media Group (NXST)
While the first two companies are internationally known TV stocks, the third isn’t as recognizable to the average person.
However, Nexstar is America’s largest local television media company. In 1996, the company started with a single TV station. Now, it has 196 stations under its umbrella, serving 114 markets that reach 63% of U.S. television households. Nexstar has also expanded into a digital media empire, running 143 local news websites.
The company’s strength lies in advertising revenue, and that spikes during election years. It’s been described as “a political advertising toll bridge that prints money during election years.”
Companies have been cutting their advertising budgets because of the hit they’re taking from the coronavirus. However, as the election ramps up and the lockdown restrictions eventually loosen, spending is expected to increase. The fall 2020 presidential election is expected to be one of the biggest and most contested ever, and that means TVs will be plastered with campaign commercials.
“I think we’re already seeing increased scrutiny on these networks. How they cover a big issue like [coronavirus] will be closely monitored,” said Professor Patrick Ferrucci, University of Colorado Boulder, in an email to InvestorPlace. He’s not sure how long-term these gains will be. But that being said, “Increased viewership is increased viewership. In a way, the pandemic is probably making up, in terms of viewership, for what turned out to be a pretty lackluster primary season.”
That said, watch NXST for an influx of ad revenue when that happens. At $59.35, it’s currently trading at 2018 levels — and a fraction of the $131 it topped in January.
Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015. As of this writing, Brad did not hold a position in any of the aforementioned securities.