Company / Analytics

Analytics, 11 February 2022

Top Streaming stocks for your portfolio

Streaming stocks have surged since the onset of the pandemic. While some may have reservations about the segment as the world shifts back to normal, many consumers still prefer streaming rather than conventional television. Streaming platforms offer more curated and affordable content.

Indeed, even before the covid-19 pandemic, people were much more interested in dropping cable services and picking up on-demand content that they can get from streaming services.

Streaming services play essential roles in our daily lives, making the segment crucial to have in any investor’s portfolio. The segment is expected to continue goring as evidenced in investments in streaming services. For instance, the eight largest U.S. media groups, including Netflix, Disney, and Amazon plan to spend at least $115 billion on new movies and television shows next year. Some analysts believe streaming services may be a staple in the foreseeable future.

Top Streaming stocks to consider

1. Roku

Roku operates the most popular streaming service in the United States. The company was founded in 2002, and developed the first set-top boxes in conjunction with Netflix.

Netflix eventually decided to spin off the Roku business into its own company so Roku could enter into third-party agreements with other streaming services. That was a good decision. Roku Originals launched on the Roku Channel in May, featuring original scripted and unscripted series, as well as documentaries. Over the next two years, the Roku Channel is expected to launch 50 new original programs.

Late last year, it reached a multi-year extension deal with Alphabet for YouTube and YouTube TV, ending a months-long battle between the two companies. Roku TV models are now available through licensing arrangements with TV brands. Therefore, consumers can discover and access a variety of streaming content. Besides that, the company also offers Roku Channel that provides its users with free access to Hollywood movies, news channels, and many more.

Early this year, Roku announced a new growth and international expansion to the Roku TV Ready™ Certification program. Some of the notable partners added this year include Element, JVC, Pheanoo, and Phillips. The program also expanded internationally with partners launching in the United Kingdom, Canada, and Mexico. Safe to say, the program that was designed to simplify and unify the modern home theatre has been a success for the company thus far.

Additionally, Roku also announced earlier in December that it is establishing an office in the city of Amsterdam. This is part of the company’s plans to expand its existing presence in the Netherlands to help with international growth. For the third quarter, Roku said player revenue fell 26% year over year to $97.4 million. However, platform revenue, which includes advertising, jumped by 82% from a year ago to hit $582.5 million.

Roku stock is down 22% so far this year. But analysts have a consensus price target of $346, which is 98% upside from today’s price.

2. Netflix

Netflix is arguably the “granddaddy” of streaming services. Founded way back in 1997, it got its start as a rent-by-mail DVD service. But those days are way, way in the rearview mirror. Today, Netflix has about 222 million subscribers in over 190 countries.

But there are challenges. As the big dog, Netflix is always fending off the competition. And there’s plenty of competition from streaming competitors including Disney, Apple and HBOMax, which is owned by AT&T.

Because of the competition, Netflix is projecting that this year will have its slowest customer growth since 2015. It added 8.3 million new subscribers in the fourth quarter, which was less than the 8.5 million it targeted.

In the first quarter of this year, Netflix says it believes it will add only 2.5 million subscribers. That would be down from 4 million in the first quarter of 2021.

To answer the challenge, Netflix is raising prices in the U.S. and Canada (a good move) while lowering prices in India to spur international growth. It also acquired the gaming studio Night School in an effort to get into the lucrative gaming space.

NFLX stock is down 33% so far this year. But with an average price target of $500, Netflix represents potential upside of more than 30%.

3. fuboTV

FuboTV isn’t the biggest or most well-known streaming service out there. But it has one thing that makes it unique — the ability to operate a sportsbook on the sporting events that it streams.

The New York-based streaming service emphasizes live sports. It has international soccer, tennis, golf and major American sports leagues. In all, you can watch more than 50,000 live sporting events each year on fuboTV. Now FUBO is in the process of acquiring licenses to operate a sports wagering platform. Its plan is to integrate its betting platform with its live-streaming service. That will give users what the company calls “a seamless viewing and wagering experience.”

FUBO is expected to release fourth-quarter earnings later this month. While it previously issued guidance for Q4 revenue of between $205 million and $210 million, the company now says it expects to top that range by $10 million. So, it appears the report will be a good one.

FUBO stock is down 24% so far in 2022. With an average price target of $33, fuboTV appears to have upside of 228%, according to Yahoo Finance.

4. The Walt Disney Company

The much-anticipated Disney+ streaming service was launched in late 2019, just in time for the pandemic. It added tens of millions of subscribers worldwide in its first year and quickly became the second-largest subscription streaming service after Netflix. Disney also owns the streaming services Hulu and ESPN+ in the U.S. Combined with its own extensive catalogue of entertainment and assets acquired from 21st Century Fox, Disney has become a formidable player in the streaming TV space. Despite being a legacy media and entertainment company, streaming services already account for more than a third of Disney’s valuation.

Due to content creation expenses, Disney doesn’t expect to begin turning a profit on Disney+, Hulu, and ESPN+ for years. The company’s primary focus is adding subscribers. However, Disney is still profitable overall. The company’s vertically integrated operations – spanning theme parks, merchandising, broadcast television, and in-house video production technology – give it plenty of cash to invest in new content without generating excessive losses. During the pandemic, Disney also quickly reorganized to permanently enable more flexible content distribution.

5. Discovery

Discovery is a global media company. In detail, the company provides content across multiple distribution platforms, ranging from pay-television (pay-TV) to direct-to-consumer (DTC) subscription products. Some of you may be familiar with the company’s portfolio that includes brands such as Discovery Channel, Food Network, Animal Planet, and Travel Channel.

Last week, the company announced that the European Commission has granted unconditional antitrust clearance for the acquisition of AT&T’s WarnerMedia business. Clearly, this is another important step closer to creating Warner Bros. Discovery. It will be a premier entertainment company that will be one of the world’s leading investors in premium content.

In addition, Discovery along with SiriusXM also announced that they are entering into a collaboration. In brief, SiriusXM’s Platinum VIP subscribers will be eligible for a 12-month subscription to discovery+, and three months of discovery+ for other SiriusXM subscriptions. The partnership aims to create more value and more choices for consumers with subscription offers that deliver the best content from both companies.

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