3 Streaming Stocks to Buy (That Aren't Netflix)
It’s no question that streaming platforms have revolutionized the way people watch TV, with the shift away from cable and satellite likely to persist in the long-term. According to data from the Motion Picture Association of America, streaming subscriptions reached 613 million worldwide in 2018, an increase of 27% from 2017.
When investors think of stocks in this sector, streaming giant Netflix (NFLX) is usually the first to come to mind. That being said, some analysts believe its competitors make more compelling investments as NFLX’s most recent earnings release revealed a substantial drop in subscriber acquisition.
With that in mind, let’s take a closer look at 3 streaming stocks to buy instead of Netflix.
Walt Disney Company (DIS)
The “House of Mouse” caught the Street’s attention with the announcement of its new streaming service, Disney+.
With more details being revealed about the platform as we approach its November 12 launch date, the $7-per-month service looks like a steal compared to NFLX’s $16-per-month premium service. Based on the most recent details emerging from its D23 expo this past weekend, investors are liking what they’re seeing.
Not only did the company announce its slate of original content including a Lizzie McGuire sequel with Hilary Duff returning, but also provided information about what’s included in a Disney+ subscription.
Users will get unlimited downloads on up to ten mobile devices and 4K Ultra HD content resolution. They will also be able to stream on up to four devices at the same time.
Tigress Financial analyst Ivan Feinseth argues that management’s continued investment of significant cash in strategic initiatives will pay off in the long-run. “The company’s continued accelerating business performance from its strong studio results and expects the ramp of its DTC streaming service to generate increasing return on capital,” he explained. As a result, the five-star analyst reiterated his Buy rating on August 26.
The Street remains bullish on DIS. It has a ‘Strong Buy’ analyst consensus and a $156 average price target, implying 16% upside potential.
Roku Inc. (ROKU)
The streaming player company has seen an impressive run this year. With shares gaining a whopping 367% year-to-date, some analysts say that Roku is still heating up.
While the company announced on August 7 that it missed on earnings in its most recent quarter, it’s clear that progress is being made. Revenue from its platform segment grew 86% year-over-year with it now making up 67% of the revenue mix. Investors have the strength of its advertising business to thank for this, with its monetized video ad impressions doubling year-over-year.
Roku’s business strategy is a fan favorite as its user base saw a 39% gain from the prior-year quarter to reach 30.5 million active users.
One five-star analyst believes the figure is only going to skyrocket. William Blair analyst Ralph Schackart predicts Roku will hit 80 million active accounts by 2025. He adds that Roku is growing at an even faster pace than Netflix did at the same stages of its expansion.
As part of its efforts to gain even more control of the $70 billion U.S. television ad market, Roku launched Kids & Family on the Roku Channel, its tool designed to provide an easy way to find tailored content on August 19.
Based on all of these factors, Schackart wrote in his August 27 note to clients that he’s keeping his Buy rating and $145 price target on Roku.
All in all, positive sentiment surrounds Roku on Wall Street. It has a ‘Moderate Buy’ analyst consensus and a $115 average price target. While the price target does imply downside of 22%, analysts expect Roku to reward long-term investors.
Iqiyi Inc. (IQ)
Analysts tell investors not to be alarmed by the Chinese online streaming and entertainment company’s recent rocky performance as IQ still remains on the path towards long-term growth.
This streaming stock is unique in that its target audience is comprised of people whose primary device is a mobile phone. Its content slate consists of highly interactive shows designed for people using the platform for only short periods of time throughout the day.
While IQ reported lackluster second quarter numbers on August 19 that revealed a deceleration of revenue growth and cost increases, investors still have plenty to be excited about.
IQ has shifted its focus away from online advertising revenues toward expanding its membership base with original content. Even though this has somewhat weighed down its top-line, its subscription revenue has seen impressive 38% year-over-year growth.
Not to mention the company has made progress in its efforts to expand its reach internationally, signing a distribution agreement with Astro Malaysia in June and launching a new joint venture to operate an over-the-top (OTT) streaming service with Indonesia’s Media Nusantara Citra in August.
All of this played into CLSA analyst Elinor Leung’s decision to reiterate her Buy rating on August 20. Despite lowering the price target from $26.50 to $21, she believes share prices could surge 16% over the next twelve months.
The Street remains cautiously optimistic about this streaming stock. IQ has a ‘Moderate Buy’ analyst consensus and a $19 average price target, suggesting 3% upside.
By Maya Sasson for TipRanks
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.