Forget Netflix, Buy These 3 Streaming Stocks Instead: Disney, Netflix, Roku, and fuboTV
December 23, 2020 at 08:00 AM EST
With declining subscription growth rates in the third quarter, Netflix (NFLX) looks less attractive compared to rivals such as Walt Disney (DIS), Roku (ROKU) and fuboTV (FUBO). These companies are racking up millions of new subscribers by offering more diverse platforms at relatively lower prices. So, could it be that they may now be more compelling investment choices than Netflix? Let’s take a closer look.
The world’s premier streaming video-services platform Netflix, Inc. (NFLX) has been facing more competition than ever in the streaming landscape; its peers are now investing significantly in the creation of original and on-demand entertainment content. Although the COVID-19 pandemic bolstered NFLX’s business initially, with a significant increase in demand for indoor entertainment, the company’s shares slid after its third-quarter earnings announcement. This was primarily due to its reported deceleration in its subscription growth, with 2.2 million paid net adds in the third quarter compared to 6.8 million in the prior-year quarter.
Moreover, NFLX has been facing a potential shortage of content as film and movie production has remained suspended. Also, many popular series are stalled, and new shows have been cancelled. These factors will likely hurt the company’s subscriber growth in the upcoming months we think.
Industry competition is likely only going to grow more intense, potentially ushering in a ‘streaming war’ as traditional and emerging media companies, such as Walt Disney Company (DIS), Roku, Inc. (ROKU) and fuboTV, Inc. (FUBO) continue to gain momentum in the streaming space. With newer and more diverse show lineups, these companies are well-positioned to surpass NFLX in the upcoming months.
Walt Disney Company (DIS)
Before the COVD-19 pandemic hit, DIS operated primarily in the fields of studio entertainment and theme parks. However, since the beginning of the year, as the global, economy shut down, the entertainment giant has focused on developing its streaming platform. The company launched Disney+ last November, which has proven to be a major source of revenue since.
On December 11, the company announced its plans to launch 100+ new titles per year for Disney+. DIS shared new details of regarding its international general entertainment content brand, Star, which will be launched in Europe and several other international markets in February. 2021. This product line-up is expected to significantly boost the company’s direct-to-consumer services revenue.
On October 13, DIS announced a strategic restructuring of its entertainment business, with an emphasis on curating original content for its streaming platform. Given the big success of Disney+ to date, the strategic plan could accelerate its direct-to-consumer business while its growth strategy.
DIS’s media networks’ revenue for the fourth quarter ended October 31, 2020 has increased 11% year-over-year to $7.21 billion. Direct-to-Consumer & International revenues have increased 41% from the year-ago value to $4.85 billion. Segment operating income from the media network grew 5% from the prior-year quarter to $1.86 billion, while free cash flow rose 224.4% year-over-year to $3.59 billion over this period.
The consensus EPS estimate of $2.60 for the next year indicates a 63.5% improvement year-over-year. Moreover, DIS beat the street EPS estimates in three of the trailing four quarters, which is impressive. The consensus revenue estimate of $71.05 billion for 2021 indicates a 9.6% increase year-over-year.
How does DIS stack up for the POWR Ratings?
A for Trade Grade
A for Peer Grade
B for Buy & Hold Grade
A for Overall POWR Rating.
The stock is also ranked #1 of 15 stocks in the Entertainment – Sports & Theme Parks industry.
Roku, Inc. (ROKU)
ROKU is a TV streaming platform that allows users to access various movies and TV shows, as well as live sports, music, and news. The company operates through two segments –Platform and Player. It offers a Roku software developer kit that enables developers to build a channel that streams their content to the TV.
On December 17, ROKU and WarnerMedia announced an agreement to launch HBO Max on the ROKU platform. This will allow ROKU to deliver an exceptional user experience to its growing consumers base.
The company recently announced the launch of its new streaming lineup, Roku Ultra, and the Roku Streambar in the United States. These innovative products should l allow the company to generate greater revenue through rising subscriptions.
ROKU’s net revenue has increased 73% year-over-year to $451.70 million in the third quarter ended September 30, 2020. Gross profit rose 81.3% from the prior-year quarter to $214.82 million, while gross margin rose 216 basis points year-over-year to 47.6% over this period.
The consensus EPS estimate for the current quarter ending December 31, 2020 indicates a 30.8% improvement from the year-ago value. Moreover, ROKU beat the Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $605.13 million for the current quarter represents 47.2% growth from the same period last year. The stock has gained 159.1% over the past year.
ROKU’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade and Industry Rank. It is ranked #4 of 30 stocks in the Technology - Hardware industry.
fuboTV Inc. (FUBO)
FUBO is a live TV streaming platform that provides live sports events, news, and entertainment content in Europe and the United States. The company’s platform allows customers to access content through streaming devices, as well as on Smart TVs, mobile phones, tablets, and computers.
The company has recently launched its live TV streaming platform on Hisense Smart TVs with the VIDAA Smart operating system, giving consumers instant access to FUBO’s live sports and entertainment network. This will help FUBO witness a surge in subscription by providing the customer a more direct way of accessing the content they enjoy.
On December 11, FUBO added EPIX, a suite of premium entertainment networks, to its live TV streaming platform. This should further expand FUBO’s entertainment offering and provide greater value to its users.
FUBO’s net revenue has increased 47% year-over-year to $61.20 million in the third quarter ended September 30, 2020. Its advertising has increased 153% from the year-ago value to $7.50 million, while subscription revenue has increased 64% from the prior-year quarter to $53.40 million over this period.
The consensus EPS estimate for the next year represents a 60.6% improvement year-over-year. The consensus revenue estimate of $437.64 million for the next year represents 78.8% growth from the same period last year. The stock has gained 426.9% over the past year.
FUBO’s promising outlook is reflected in its POWR Ratings. It is rated “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade and Industry Rank. Among the 15 stocks in the Entertainment – Sports & Theme Parks industry, it is ranked #3.
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DIS shares were trading at $173.85 per share on Wednesday afternoon, up $3.40 (+1.99%). Year-to-date, DIS has gained 20.20%, versus a 16.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.Forget Netflix, Buy These 3 Streaming Stocks Instead: Disney, Netflix, Roku, and fuboTV appeared first on StockNews.com