I know I’m dating myself, but I can remember when watching TV meant a choice of four channels. And, oh yeah, they were in black and white!
The evolution of television has been pretty amazing. For decades, the cable companies were the powers of the industry. Then, satellite companies made significant inroads into the cable providers’ business.
The latest—and most threatening—interlopers are the streaming companies. Instead of a download, streaming is a different way of receiving data—in this case, television fare. The information you want travels from a server in a continuous flow. Combined with a decoder (a stand-alone player or plugin that is part of a web browser), that stream and server provide the ability to view live or prerecorded broadcasts.
Several services are cord-cutters—allowing subscribers to trash their cable and/or satellite companies. Others have created alliances with those competitors.
Netflix (NFLX) had the streaming market mostly to itself for years, growing its membership to some 130 million. Netflix offers a huge—and growing—library of television shows and movies. And in its most recent history, the company has spread its talents to creating original series and movies, such as “House of Cards” and “Stranger Things.” As well, Netflix has cemented partnerships with other entertainment companies like Marvel to co-create shows.
Netflix stock has been a proven winner for the company’s investors. But now trading around 355, with a P/E of 126, the price of the company’s shares is pretty lofty.
Fortunately, investors wanting to take advantage of this rapidly-expanding entertainment niche, have several other choices of streaming stocks.
Many of the newbie streamers are not yet public companies. But most have valuable partnerships with some of their larger, more diversified competitors. And some of the most exciting streaming stocks are the larger companies that have been around for many years. I’ve waded through a bunch of these investing ideas and have narrowed it down to three companies that offer some great investment potential. They are pioneers in their respective fields, and have succeeded over many years by adapting to new technologies.
3 Streaming Stocks
Streaming Stock #1: Apple (AAPL)
The first one is a business that has succeeded in revolutionizing the personal computer, music and cell phone industries. And now, it is tackling streaming. You got it—it’s Apple Inc. (AAPL). Apple has already tackled the subscription business with its App Store, iCloud and Apple Music.
And earlier this year, the company announced its new streaming service, Apple TV Plus. The announcement of $2 billion worth of original programming featured some of Hollywood’s biggest names as the development masters, including Steven Spielberg, Oprah Winfrey, Reese Witherspoon, Jennifer Aniston and Steve Carell. The service is expected to launch in the fall in more than 100 countries, and will be ad-free, available on demand, and viewable both online and offline. Access will be via the redesigned Apple TV app on iOS, Mac, Roku, Fire TV and televisions from various manufacturers.
This product promises to allow consumers to see not only its original programming but also offers viewers the ability to cherry pick from a number of other channels, including HBO, Showtime, Starz and CBS All Access. Pricing has not yet been announced.
Time will tell how well Apple Plus TV fares, but I wouldn’t bet against this company that has proven itself very adaptable to winning trends.
Apple shares are now trading at a very reasonable P/E of 15, and the company’s stock has been initiated and upgraded at several brokerage houses in the past few months, including:
Initiated: Evercore ISI Group: to Outperform
Upgrade: Bank of America: Neutral to Buy
Upgrade: Barclays: Equal-Weight to Overweight
Streaming Stock #2: Amazon (AMZN)
Next is Amazon.com Inc. (AMZN). You can get Amazon’s streaming service through a subscription to Amazon prime (now at more than 100 million subscribers) or a video-only subscription.
The service includes original series such as “The Marvelous Mrs. Maisel” and “Bosch.” It also offers exclusive rights to “Downton Abbey,” and HBO’s back catalog of shows. As well, you can add to your subscription HBO, Showtime and other premium channels.
Google and Amazon have now made up, and with a new collaboration, Amazon Prime Video will soon be available on Google’s Chromecast and Android TV devices. And Amazon will offer Google’s YouTube, Tube Kids and YouTube TV.
Amazon streaming can be accessed in a variety of ways. It supports 4K and HDR streaming, and is available via offline downloads, works on a web browser, and on Android and iOS devices, Fire devices (TV, TV Cube, TV Stick, phones and tablets), game consoles (PlayStation, Xbox, and Wii), Smart TVs, and set-top boxes (Apple TV 4K, Roku, Google TV, TiVo and Nvidia Shield).
Amazon stock has seen a lot of analyst action lately, with the following coverage initiation and upgrades:
Initiated: Societe Generale: to Buy
Initiated: Evercore ISI Group: to Outperform
Upgrade: KeyBanc: Sector Weight to Overweight
Initiated: Pivotal Research: to Buy
And while AMZN shares are trading at more than 1,800, the company’s P/E is a hefty 75, we need to remember that this company has almost always traded at high levels, but that hasn’t stopped investors from almost a cult-like following that continues to drive the share price upward.
Streaming Stock #3: Disney (DIS)
Last but not least is a name we have loved for many years—The Walt Disney Company (DIS). For years, Disney has licensed its content to services such as Netflix, for which it pulls in about $300 million, annually. But now it is set to launch Disney+ (a Netflix-style video platform) next November, in which the company plans to spend billions of dollars over multiple years. The service will include more than 100 recent and 400 classic movies and 7,500 television episodes. It expects to reach 60-90 million subscribers by 2024, garnering some $5 billion in annual revenues.
Disney+ will be accessed via laptops, mobile devices, gaming consoles and connected TVs, as well as on Apple TV, PlayStation 4 and the Roku Channel.
Disney+ has been a long time coming. The idea started in 2016, when the company acquired a minority stake in BAMTech (a spin-out of MLB Advanced Media’s streaming technology business) for $1 billion, with an option to acquire a majority stake in the future. A year later, Disney increased its stake to 75%.
In the short term, its original content and severing of its license deals may hurt it financially, but in the long run, having an original content streaming service makes a lot of sense.
Disney’s catalog is unrivaled and includes its well-loved Disney animation and live-action movies, as well as its Star Wars franchise, Pixar, 20th Century Fox, Marvel, LucasFilm, National Geographic and 20th Century Fox. And later, analysts expect the company to bundle its movie content with its other products, including Hulu, ESPN and ABC.
Trading at a P/E of just 14 and a price around 132, analysts are jumping on board Disney stock, as we can see by their recent action:
Upgrade: BTIG Research: Sell to Neutral
Upgrade: BMO Capital: Market Perform to Outperform
Upgrade: Cowen & Co.: Market Perform to Outperform
Initiated: Rosenblatt: to Buy
While you can’t say that any of these three companies are the sexy, hot stocks of the moment, there’s something to be said for betting on past winners who are proven survivors that have enriched investors for years.
Nancy Zambell, Chief Analyst of the Financial Freedom Federation, has spent more than 30 years helping investors navigate the minefields of the financial industry. Nancy's book, Make Money Buying & Selling Stocks is an introduction for new investors and a reminder for experienced investors on how to profit in the stock market.Learn More