This year has been a time of reckoning for streaming stocks. The pandemic-induced boom in subscription services has long since passed.
Nowadays, consumers are spending their disposable income on real-world experiences and shying away from digital services. In fact, researchers are now pointing to subscription fatigue as a rising concern.
This has caused growth to tail off at many streaming companies. After a gold rush a couple years ago when every television company was launching its own subscription service, the industry now appears set for retrenchment. Meanwhile, investors are running away from the sector, with companies like Walt Disney (NYSE:DIS) plunging to multi-year low stock prices.
Let’s delve into three streaming stocks that investors can still depend upon during this unsettling period.
Netflix (NFLX)
The collapse in Walt Disney’s stock price and profitability has caused analysts to reflect on the streaming industry as a whole. One of the takeaways appears to be that Netflix (NASDAQ:NFLX) does indeed have a huge first-mover advantage.
Netflix carved out a huge hold on the streaming market back in the 2010s before the rest of the industry woke up. Now, it appears too late to overcome Netflix’s competitive moat. True, Netflix may not have the most marquee content. But it has a truly massive content library with enough niche content to appeal to a vast number of users.
Also, Netflix was smart in realizing the potential of overseas markets. They have made impressive efforts to launch an unmatched amount of shows in foreign languages and locally-produced content for key international markets. Those include Germany, Mexico, South Korea, and Brazil, making Netflix a global brand that the other streaming players simply haven’t been able to match.
Concerns about profitability were also overblown. Netflix has been able to rein in its spending enough to become strongly profitable. Analysts expect nearly $12/share in earnings this year. That doesn’t necessarily make NFLX stock a bargain at 37 times forward earnings. Yet, Netflix’s combination of strong growth and solid enough profitability stands out at a time when most rival television firms are in a state of crisis.
Spotify (SPOT)
Like Netflix in film, Spotify (NYSE:SPOT) has built a tremendous competitive moat for itself as the dedicated music streaming platform.
Spotify was founded in 2006 and entered the U.S. market in 2011. That gave it nearly a decade head start over most of its competition today, to the extent it has competition at all. On a global scale, Spotify competes with offerings from firms such as Alphabet (NASDAQ:GOOGL NASDAQ:GOOG) and Amazon (NASDAQ:AMZN). However, these don’t have nearly the same level of focus on music streaming.
Spotify’s quarterly numbers demonstrate this fact. Despite the broad streaming slowdown, Spotify managed to grow its monthly active users 27% to 551 million. And paying subscribers leapt 17% higher to 220 million. Both users and paying subscriber figures topped expectations, and showed that Spotify is avoiding the streaming fatigue effect that has hit other services.
Comcast (CMCSA)
Comcast (NASDAQ:CMCSA) is a diversified telecommunications and media company. It is most known for its core Comcast cable TV and internet business.
However, Comcast also operates NBC Universal along with Universal Studios, some theme parks, and the UK’s Sky television provider.
This makes Comcast a more powerful player in the streaming wars since it has a strong balance sheet and diversified cash flows from its other businesses to support its streaming business. There is a fair bit of intellectual property and intriguing media assets within the Universal and NBC umbrellas.
It’s no secret that it’s been challenging trying to make the streaming economic numbers pencil out well. However, Comcast is cheap even with the uncertainty around the future of television. CMCSA stock goes for just 12 times forward earnings today. Morningstar’s Michael Hodel believes the stock is worth $60/share versus its current $45 price.
On the date of publication, Ian Bezek held a long position in SPOT stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
