Content is king, and nowhere is that phrase more relevant than when it comes to streaming. And a handful of streaming stocks have reaped the benefits.
In a few short years, the broadcast landscape has been revolutionized with the advent of television and movie streaming. And Netflix (NASDAQ:NFLX) is no longer the only game in town.
Currently, there are nearly a dozen popular streaming services for consumers to choose from. Most people have monthly subscriptions to multiple streaming services. And the move towards on-demand streaming of TV programs and movies looks like it will only grow in coming years. In fact, according to Grand View Research, the video streaming market was valued at more than $40 billion in 2019 and is forecast to grow at a compound annual growth rate (CAGR) of 20.4% through 2027.
Thus, streaming services are here to stay. And that also means streaming stocks could be on the rise. Which ones? Here’s look at four that can go the distance.
Hot Streaming Stocks: Netflix (NFLX)
Let’s start with the elephant in the room: Netflix. The first and still the largest streaming service in terms of paid subscribers, Netflix stock has been on fire since Jan. 19. This is when the company reported its fourth-quarter results, which blew away analyst expectations.
The day after the results, NFLX stock rose as much as 18% in a single trading session, hitting an all-time high of $593.29 per share. While the stock has come off the boil since then, the latest numbers from the company show that Netflix can not only go the distance but continue to dominate streaming for the foreseeable future.
What sent investors and analysts into a tizzy was news that Netflix has surpassed 200 million subscribers worldwide for the very first time, the company is considering stock buybacks and, best of all, it will be cash flow positive by 2022. In other words, this mean Netflix will be able to fund its own movie and television productions and won’t need to borrow money any longer.
A day after the earnings report, Wells Fargo raised its price target on NFLX stock from $510 per share to $700 per share. And since then, 15 other Wall Street firms also raised their price targets on the stock. Thus, investors should view the current share price dip as a buying opportunity.
It might seem hard to believe, but the Disney+ streaming service is barely a year old. Launched in November 2019, Disney+ has racked up nearly 90 million paying subscribers in less than 15 months. The company now forecasts that it will have as many as 260 million subscribers by 2024.
That’s incredible growth my any measure. However, the novel coronavirus pandemic that has forced people to shelter-in-place has helped. But so too have popular brands such as Marvel, Star Wars, Pixar animation and National Geographic. And, Disney has been quick out of the gate with popular shows such as The Mandalorian and WandaVision.
Indeed, streaming has kept Disney and its stock afloat as the pandemic has forced the company to shutter its theme parks and cancel its cruises. The Disney+ platform has proven to be so popular that the company is now reorganizing itself internally so that it can focus primarily on streaming content to its loyal base of subscribers.
Overall, Disney is centralizing its media businesses into a single unit that’s responsible for content distribution, ad sales and the Disney+ platform. Analysts have applauded the move, with some predicting that Disney will eventually dethrone Netflix as king of the streaming hill.
Hot Streaming Stocks: Apple (APPL)
Apple’s streaming service, called Apple TV+, is not a juggernaut on the order of Netflix or Disney+. Not yet, anyway.
But Apple’s streaming offering is slowly building a following as the company develops its own TV and movie content. Programs such as The Morning Show and Ted Lasso have been embraced by audiences and critics, and exclusive movies such as the World War II drama Greyhound starring Tom Hanks have created some buzz. To date, Apple TV+ has attracted about 35 million subscribers. The majority of them (62%) are still on free trials, but it remains early days for the streaming service that was launched in 2019.
What Apple TV+ has going for it the most is the fact that it is being operated by the largest technology company in the world. After all, no company has deeper pockets than Apple. And the Silicon Valley-based organization seems content to slowly build Apple TV+ over time while it continues to derive the majority of its revenue from iPhones and Mac computers.
At the end of the day, Apple has the resources to carry Apple TV+ as long as it takes for the division to become a success. And signing exclusive deals with content creators such as Oprah Winfrey, Steven Spielberg and Tyler Perry is sure to pay off.
Comcast isn’t a household name like the other stocks on this list, but it is a broadcast powerhouse and has a number of popular brands in its stable that should enable its Peacock streaming service to go the distance. Launched in July 2020, Peacock offers classic television shows such as Cheers, Frasier, 30 Rock, Saturday Night Live and Law and Order. The streaming service also offers a selection of movies and current affairs programs. However, its main attraction currently is its catalogue of TV shows that were produced, and originally aired, by NBCUniversal. And many of those shows have proven to be comfort viewing to people during the pandemic. Within a few months of launching, Peacock had racked up 22 million subscribers.
Comcast’s strategy with Peacock is different than the other streaming stocks on this list. Unlike Netflix and Apple, Comcast owns a broadcast network with NBC. (Disney owns some specialty channels such as the sports focused ESPN). Peacock is being used to both stream current shows available on the NBC network, such as This is Us, as well as a repository for past NBC hits such as The Office.
Collectively, the strategy seems to be a success so far. And while Peacock doesn’t have nearly as many movies as Netflix, it’s TV shows seem to stand-up to repeat viewing. Plus, like Apple, Comcast has the resources to put behind Peacock and its future development, such as the company’s recently announced deal with wrestling’s WWE.
On the date of publication, Joel Baglole held long positions in DIS and APPL.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.