I don’t usually write about the same topic too often, as I like to explore what’s new and different in the markets. But I wrote about streaming stocks in February—right before the market decided to lose its head, and back when the streaming stocks were going great.
That has certainly changed!
Since the beginning of the year, Roku (ROKU) has fallen 66%, Netflix (NFLX) 62%, and Amazon (AMZN) 20%.
Get Your FREE REPORT
Find out which stocks you should buy this month to make money in this volatile market.
The Russia-Ukraine war, increasing inflation, and rising interest rates, accompanied by recession fears, have caused significant volatility in the markets and dragged down the majority of stocks, especially tech companies (down 22% since January). Meanwhile, Covid—the primary reason that streaming stocks had gone through the roof—has been on a definite downward trend. Of course, the death spiral for the coronavirus hasn’t happened, as now we have another new strain, but we certainly are not in the horrid space we were even a year ago.
People are returning to the office; they are going out to restaurants and movies; and they are traveling. Hence, folks are not spending all of their time in front of the television right now. That was evident when Netflix released its most recent quarter’s financials in April. For the first time ever, the company reported that its global subscriber base dropped by 200,000 from year-end 2021. And considering that Netflix was said to be projecting 2.5 million additions, that was a shock to the markets—and the rest of the streaming stocks! The news took the entire sector down. And it didn’t help that Netflix announced that it would probably lose another 2 million subscribers over the next few months.
After the fallout, I decided to take another look at the industry to see if it there was any subsector or related streaming sectors that was showing any signs of life. We all know that streaming is here to stay; it’s just not growing at the pandemic rate.
But the sector is still expanding. In fact, according to MoffettNathanson, in the second quarter of this year, 40% of Americans—a record high—no longer have pay TV, and rely solely on streaming. And that includes me. I cut the cord about 2 ½ years ago, and haven’t missed paid TV at all.
As you can see from the following graph, I am not alone! And with 5G breathing down our necks, you can expect even greater migration to streaming. The 5G technology has already resulted in bandwidths of over 1GHz, which has resulted in a 10x decrease in end-to-end latency. And the technology is already lending itself to improvements in the Internet of Things, virtual and augmented reality, and telehealth.
Source: HarrisX, MoffettNathanson
I looked at all the major streaming stocks, and was a bit disappointed that although they have all fallen precipitously, they still don’t look too buyable to me.
Of course, like all one-trick ponies, streaming companies will have to adapt or die. And many are doing that. One change is ad-supported services, the OTT market (over-the-top), which delivers ads through online video streaming. Discovery+, Hulu, Paramount+, Peacock, and HBO Max have jumped on that bandwagon. The OTT market is expected to grow at a 12% annual rate over the next five years.
Another avenue of growth for streaming is music, and 5G is also stoking that expansion. The music streaming industry is forecast to expand at a 14.7% annual rate from this year until 2030.
And let’s not forget the incredible growth of the smartphone industry. Globally, mobile phone shipments rose 6.6%, to reach 1.65 billion units in 2021, 82.1% (135 billion) of which were smartphones. That growth has slowed in 2022, due primarily to the shortage of chips. But expansion will continue, and IDC is forecasting that the number of smartphone units will rise to 1.53 billion by 2026.
Competition is also heating up with the streamers, as cable networks are now offering streaming on apps. In my research, I also found that telecom companies are getting in on the streaming act.
And while I believe the streaming stocks will certainly rebound, I’m not yet ready to commit to them.
AT&T (T): An Alternative Streaming Stock
However, I did find one company that interests me, although it’s certainly not a traditional streamer.
That company is AT&T, Inc (T). That’s right, the company we used to call Ma Bell, as it held a monopoly on local telephone companies until the government pulled the plug on the company in 1982. But AT&T shrugged it off, split up its companies, and went on to become a giant in the telecom business.
Today, AT&T provides telecommunications, media, and technology services around the world. It offers wireless voice and data communications services, and sells handsets, wireless data cards, wireless computing devices, and carrying cases and hands-free devices through its own company-owned stores, agents, and third-party retail stores.
The company also provides data, voice, security, cloud solutions, outsourcing, and managed and professional services, as well as customer premises equipment for multinational corporations, small and mid-sized businesses, governmental, and wholesale customers. AT&T also offers broadband fiber and legacy telephone voice communication services to residential customers.
And, of course, it has streaming, through its DirecTV Stream, an on-demand and live TV streaming service which used to be called AT&T TV. This service doesn’t require a contract and it is completely app-based. So you don’t need a set-top box or stick or anything else to access it.
The service includes a lot of channels that other streamers don’t offer, as AT&T combines elements of its cable offerings with the streaming channel. In a recent package, the channel provides complimentary access to HBO Max, SHOWTIME, STARZ, EPIX and Cinemax for your first three months. And recently, the services added four new channels—Ion, Cozi TV, Grit and Bounce TV.
The shares of AT&T are trading at a P/E less than 7. And two analysts have just boosted their earnings projections for the company. The shares of the company recently received new coverage by Scotiabank, citing a new era of wireless growth in both the U.S. and Canada. Hedge funds are also pretty bullish on the stock, with 74 funds now shareholders.
Sure, AT&T is not a pure-play streaming stock, but trading at this level with a very nice dividend yield of 6%, it looks good to me!
Do you have your eye on any streaming stocks not mentioned above? Tell us about them in the comments below.
Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. As a lecturer and educator, Nancy has led seminars for individual investors at the National Association of Investors, Investment Expo and the Money Show. She has also taught finance, economics and banking at the college level, and has been quoted extensively in The Wall Street Journal, Investor’s Business Daily, USA Today, and BusinessWeek. Now let her give you the tools and resources, including a monthly magazine, for gaining the peace-of-mind to live comfortably now and in retirement in her Cabot Money Club.Learn More >>