In the media space, things are changing. And changes aren’t slowing down due to the novel coronavirus. If anything, the pandemic has sped up the move of entertainment from legacy platforms like television, over to new services like streaming. This means there are many great media stocks to buy to play this trend.
As our own Matt McCall wrote April 28, Netflix’s (NASDAQ:NFLX) U.S. subscriber base has climbed by 10 million during the outbreak. But don’t expect streaming tailwinds to end anytime soon.
Recently, we asked Les Rose, Professor of Broadcast and Digital Journalism at Syracuse University’s Newhouse School, to give us his take on long-term streaming trends. In an email to InvestorPlace, Rose compared the rise of streaming in the 2020s to the rise of radio in the 1930s.
“Think [about] the last time there was immense unemployment, great anxiety, and a newer form of mass media emerged: the Great Depression. Radio was booming in the ’20s, but in the ’30s and after the crash, it truly boomed,” said Rose.
The same could be said about digital streaming. An expected economic downturn means Americans will be tightening their belts. But households are unlikely to get rid of streaming services to save a few bucks. The amount of entertainment you get outweighs the $10-$20/month in cost savings.
“One could argue that this is a structural change that [will] accelerate cord cutting for all ages — not just younger ones,” said Robert Siegel, lecturer in management at Stanford Graduate School of Business, in an email to InvestorPlace. Furthermore, Siegel says:
“Media might be completely transformed as streaming services become the way that content gets distributed, and more content (live sports, new cinema releases) move to streaming services from either going to broadcast/cable or movie theaters. In fact, movie theaters may never come back due to social distancing requirements, and with many homes having big screen TVs, I think it is more likely that content gets sent to streaming services first.”
In other words, expect the “new normal” that is streaming media to continue. So, what are some stocks to buy in anticipation of this long-term trend?
A few names come to mind:
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Disney (NYSE:DIS)
- Netflix (NASDAQ:NFLX)
- Roku (NASDAQ:ROKU)
- ViacomCBS (NASDAQ:VIAC)
Some of these names are “old-school” media conglomerates. Others are up-and-coming streaming giants. But all of them could see benefit from this long-term tailwind. Let’s dive in and see why these are five stocks to buy in a changing media landscape.
Alphabet (GOOG, GOOGL)
Google’s parent company may not be top of mind when thinking about streaming stocks. Thanks to the company’s ownership of YouTube, consider this one of many opportunities as Americans “cut the cord” and move from cable to streaming services.
Why? You may think of YouTube for its free, ad-supported platform. The company has actually made big moves into the subscription streaming space. With YouTube TV, you can get the benefits of cable television (major broadcast and cable networks), at a lower cost.
Granted, YouTube TV’s sticker price ($50 per month) seems pricey relative to streaming platforms. But, as Americans want to cut down on expenses, yet still have the programming options of cable TV, there may be sufficient demand to make this service a winner.
The pandemic has helped accelerate demand for this service. Daily active users climbed 40% since February, from 580,300 to 830,000. Considering that 64% of households aren’t interested in keeping cable TV subscriptions long-term, expect more customers to flow to YouTube TV as a lower-cost alternative.
In short, the growing popularity of streaming makes GOOG stock a great buy on this long-term trend.
When talking about streaming media stocks to buy, you can’t leave out the House of Mouse. The media conglomerate has adapted better to a changing media landscape than its peers. Through its Disney+ platform, along with ESPN+ and majority ownership of Hulu, the company offers the best of both worlds. Exposure to long-term streaming growth, plus a rich library of media properties (including Marvel and Star Wars).
Disney+ has topped 50 million subscribers. Hulu’s subscriber base has also surged as of late. The dearth of sports programming due to the coronavirus may be bad news short-term for ESPN+. But long-term, this streaming service should be a winner, as sports viewing moves from Cable TV to streaming platforms.
There are some things to consider before jumping into DIS stock today. The pandemic has hurt their theme park and motion picture divisions. These headwinds have pushed shares lower since the pandemic first hit the United States.
Nevertheless, that may mean that now’s the time to buy. Unlike Netflix, you can buy Disney shares at prices below where they were a few months back. Given that most of the company’s coronavirus shares could rebound tremendously as the pandemic winds down.
What’s there to say about NFLX stock that hasn’t already been said? I don’t have to tell you how the pandemic has been a tailwind for the company. Shares now trade above where they were back in February, a rare feat as markets overall struggle to recover.
Yet, is there good reason to buy shares now, after the recent run-up? Yes! Subscriber growth may have skyrocketed due to “shelter-in-place,” but don’t expect things to fizzle out anytime soon.
Why? Netflix’s content production methods mean the company has enough content in its pipeline as the pandemic halts new film and TV production. Also, while the U.S. market is set to become more competitive, the company’s aggressive overseas growth could more than make up for the difference.
Shares may be close to 52-week highs. But as runway remains, this is still one of the best media stocks to buy.
Like Netflix, ROKU stock has benefited from the current environment. Yet, the company has experienced some issues despite an increase in usage. As InvestorPlace’s Chris Markoch wrote April 29, millions more are using the company’s streaming services. But due to declines in digital advertising revenue, the company expects challenges.
There could be good reason to buy into the company now, even after shares have rallied off of recent lows. Ad revenue may be taking a hit short-term, but long-term, increases in active accounts could mean big upside once things bounce back.
And the company’s runway goes beyond the U.S. market. Benchmark analyst Daniel Kurnos recently called overseas growth a “nascent, greenfield opportunity.”
As the stock remains far below past highs, now could be the time to enter ROKU stock. Expect a few bumps in the road as the ad market suffers. But coming out of this crisis, the company may become a stronger player in the advertising-based streaming space.
This name may conjure up thoughts of “old school” media. And you would be partially right. The media conglomerate faces headwinds as its broadcast and cable TV properties become less relevant in the age of streaming. Wall Street agrees, with the stock trading at less than half of where it was earlier this year.
There are many ways why VIAC stock could profit from the pivot from TV to streaming. The company has thrown its hat in the streaming ring with CBS All Access and PlutoTV. The company’s large library of content could also mean they benefit from the rise of streaming.
As a Seeking Alpha contributor recently wrote, ViacomCBS is a prime takeover target. With an extensive library of movies and TV shows, an up-and-coming streaming player could buy them cheaply, monetize content better than the company is able to do on its own.
Also, ownership by a larger media or tech company could boost both of the company’s streaming platforms. But a takeover doesn’t have to happen for this stock to be a winner. Given how much risk has been priced into shares, better-than-expected performance could mean a big rebound for VIAC stock.
This is more a stretch when its come to a way to play changing trends in media. Nevertheless, this could be one of the best media stocks to buy as long-term streaming tailwinds continue.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.