2020 is officially the year of streaming wars. With stay-at-home orders in place since March, streaming platforms are now the major (and only) source of entertainment. The big players in the industry have taken their efforts to the next level with a steady stream of content. This radical shift in entertainment due to the novel coronavirus pandemic has many investors putting their money behind streaming stocks.
Streaming content is a big part of everyone’s lives right now, but experts believe this trend is here to stay post-Covid. Having access to a vast library of content from the comfort of your home is a perk that can’t be beaten.
There’s no denying that the pandemic has redefined the entertainment sector, but it’s also worth noting that the industry is highly competitive. Ultimately, only a few companies will come out on top and reign as the leaders of the industry. With that said, there’s no better time to invest in video and music streaming stocks.
The following are my top picks in the space:
Streaming Stocks: Netflix (NFLX)
The OG video streaming platform, NFLX stock is a winner during the pandemic. Fueled by the stay-at-home orders, the company saw its subscriber rate hit new highs. In its most recent quarter, it added 10 million new subscribers to the platform, beating the Street’s 7.5 million estimate. The entertainment giant amassed a user base of 25.9 million during the first half of 2020.
Netflix’s growth has slowed since its March momentum, but that’s no reason to hold back on this stock. The company has halted the production of numerous TV shows since the virus, but has enough content to see it through the next couple of months. This kept subscriber growth steady and allowed the company to hyper-charge its margins. With the ability to spread costs over a larger consumer pool, the company’s operating margin increased from 8.4% in 2019 to 22.1% in Q2 of 2020.
Netflix should be at the top of your streaming stocks list regardless of any short-term pullbacks. The company has a first-mover advantage and will continue to dominate TV screens for years to come. All of these factors add up to make NFLX stock a strong streaming stock to buy.
Prior to the pandemic, the word Disney was synonymous with its theme parks and movies. But since the start of 2020, the entertainment giant is making waves in the world of streaming. Launched in November of 2019, Disney+ is now a major revenue driver for the company. The platform’s unique advantage lies with its pricing model. At just $6.99/month Disney+ is nearly half the cost of Netflix.
This is an attractive proposition for many customers. The streaming stock surged by almost 65% from its lows in March and now boasts 60.5 million paid subscribers worldwide. This demand was fueled in part by the release of Hamilton and Mulan. Each were set for a theatre release but went straight to Disney+.
Experts believe that this initial success will help Disney drive stronger growth opportunities in the years ahead. With the second wave of the coronavirus is full swing, there is a lot of uncertainty about the future. This will stall the growth of Disney Parks and Cruises for some time. Nevertheless, the future of “the happiest place on earth” lies in streaming. That makes this stock buy-worthy now before prices soar.
It’s not just video streaming that’s making waves this year. The music platform Spotify emerged from the pandemic as a winner. After seeing a slump in the initial phase of the Covid-19, the music giant made a strong recovery. As of September, the company boasts a user base of 299 million active users, which is a 29% increase from 2019.
Spotify’s strength lies in its strong growth potential. With over three billion smartphone users across the globe, its total addressable market is vast. Digital platforms like Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google and Facebook (NASDAQ:FB) already have a customer base in the billions. As more people take to music streaming, Spotify’s market share will continue to rise.
In addition to this, Spotify also benefits from a diversified business model. In an effort to expand its base, the company made some big investments in podcasts this year. Most notably, Spotify purchased Joe Rogan’s podcast for more than $100 million in May. This will enable the platform to reach new users while capitalizing on ad revenue.
Music streaming is still in the nascent stages in comparison to video streaming. But Spotify has managed to position itself as the leader of this space. The company will have the ability to drive strong user growth on its platform with a diverse business model. So place your bets on this streaming stock before it takes off.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.