Among other things, 2020 has been a year to invest in streaming stocks. In fact, this year has the plot line of a binge worthy show. There are plot twists followed by plot twists. And most of the 2020 narrative centers around the novel coronavirus.
In our current story line, the hospital systems are once again overwhelmed, with many states reinstating strict mitigation efforts. The reality is that what started out to be a pause for the Thanksgiving holiday is likely to extend until Christmas and through to New Year’s Day.
But the words “new normal” are taking a back seat to a “light at the end of the tunnel.” That light is in the form of a Covid-19 vaccine. But it will still take time before America and the world gets back to anything approaching business as usual.
As intriguing as it has been, we all want “season 2” to be cancelled.
However as an investor, you should invest with an eye towards the future. And that’s the beauty of investing in streaming stocks. They’re definitely a part of our here and now. But they’re also likely to be a part of our future. Cords have been cut. Consumers aren’t going back.
With that in mind, let’s take a look at five streaming stocks that will get your portfolio safely into the new year:
- Roku (NASDAQ:ROKU)
- Disney (NYSE:DIS)
- Comcast (NASDAQ:CMCSA)
- Netflix (NASDAQ:NFLX)
- DISH Network (NASDAQ:DISH)
Streaming Stocks: Roku (ROKU)
If streaming services are the lock, then Roku is the key. And what a magical key it is. With Roku, consumers can access all their favorite streaming services with the touch of a button. ROKU stock has rewarded its investors handsomely this year. The stock is up more than 100% in 2020.
With that in mind, there could be some logic to taking some profits before the year end. But let’s say you imagine that streaming stocks don’t enjoy the same level of growth in a post-pandemic world. If you’re investing in Roku, that doesn’t really matter.
Roku is the new cable provider. Yes it has competition from the likes of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL). But it’s more than holding its own. The company just posted its strongest growth in hardware shipments in seven years. And saw its active account base climb by 43% on a year-over-year basis.
It will take some time before Roku becomes profitable. However, with forecasts for 53% revenue growth this year followed up by 38% in 2021, the company is well on its way. And at 15x next year’s sales, ROKU stock is a bargain in comparison to some of the trendy tech stocks that have come to market this year.
Disney is a stock that investors love to hate. And this year, the haters have had their moment. Theme park attendance has cratered. The company’s cruise ships remain in dry dock. The studios are having difficulty creating new content.
Yet for all of that, as of this writing DIS stock has turned positive for the year. And for that, you have to look no further than Disney+, the company’s own streaming service. In just 10 months, the service has attracted 73 million paid subscribers. Clearly the pandemic had more than a little to do with that. But it wasn’t the only reason.
Disney has long understood that it needed to become sticky as well as magical. And becoming one of the world’s largest streaming stocks is one part of that plan. It’s why the company has invested in multiple production studios. The company has over 100 projects in development. In fact, on the company’s most recent earnings call, new CEO Bob Chapek said that the company’s direct-to-consumer business was the key to its future.
And yes, eventually the theme parks will reopen. In fact, if my social media feed is any indication, I’d say that even operating with limited attendance, the theme parks are managing to survive. A return to normal may take some time, but with Disney+ carrying the heavy load for now, Disney looks just fine.
If you’re looking for a more granular play in streaming stocks, I’ll offer you Comcast. The reason for that is the company’s own streaming service, Peacock. A recent study by Kantar found that Peacock added more new subscribers in the third quarter than any other streaming service.
And what makes this number even more impressive is that the same study found that 10% of the company’s new subscriptions were due to consumers switching services. Streaming fatigue is a real thing and it appears that Peacock is benefiting from being one of the newest kids on the block.
It’s likely that the service will get an extra kick when The Office leaves Netflix at the end of December to its new home on Peacock. According to an InMyArea Research survey conducted in early 2020, “more than 18 million U.S. subscribers watch The Office.” Let’s say that 10% of those cancel their Netflix subscription (as they say they will). Peacock looks to be the beneficiary.
CMCSA stock only turned positive for the year in November. However, the stock is up 23% in that period. The stock appears to be hitting the price target set by analysts. But with the company raising rates both for its cable TV and internet offerings, the company may get a boost from legacy consumers as well, particularly as families will continue to need reliable internet service for remote work and online learning.
Didn’t I just say that Netflix was losing The Office franchise? And didn’t I just say that it could lead to 10% loss in subscribers? What I didn’t tell you was that if that came to pass, it would be a $935 million hit.
All of that is possible. But I would still be irresponsible to not put NFLX stock on this list. The reason for that isn’t because of some blockbuster new show, although I’m sure they’ll have several. It’s a bit more boring than that.
The company was free cash flow (FCF) positive in its most recent quarter. This may not last. In fact it probably won’t. The company was not able to produce new content in the early days of the pandemic. While that wasn’t great for getting new content out, it did help cut costs.
I personally doubt that Netflix will see as large of a drop-off in subscribers as feared when The Office heads for Peacock. And as Netflix continues to roll out new content, it’s hard to see the company as anything but a long-term winner among streaming stocks.
DISH Network (DISH)
If you’re looking for an under-the-radar play among streaming stocks, I invite you to consider DISH Network, which owns Sling TV. After carrying DISH stock for several years, Sling looked like it was running out of gas. And in fairness, it does look a little less attractive than other streaming services.
But one thing Sling has going for it is live sports. Dish Network reported that it gained over 200,000 Sling subscribers in the third quarter. And the return of live sports had a lot to do with that. No matter how long the pandemic lasts, it appears that live sports will remain with us. That may not be enough, and to be honest, the company may benefit more from its move into wireless phone service with its acquisition of Boost Mobile.
All in all, Dish Network remains a speculative play and certainly not a pure play among other streaming stocks. Nevertheless, the stock has turned positive for 2020 and has an attractive price-to-earnings ratio of around 15.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over six years. He has been writing for Investor Place since 2019.