Top 5 Stocks to Buy to Win the Streaming Wars
Note: Post may contain affiliate links.
5 Streaming Stocks to Buy Now
Streaming has become an unstoppable trend and it could be a $149 billion market by 2026. You know the popular players like Disney and Netflix, but in this video, I’ll uncover the best stocks you haven’t heard of, the top streaming stocks to buy to ride this trend.
We're building a huge community on YouTube to beat your debt, make more money and start making money work for you. Click over to join us on the channel and start creating the financial future you deserve!
Join the Let's Talk Money community on YouTube!
Video Streaming Market Surged Amidst the Pandemic
Nation, the video streaming market surged last year with major services reporting 50% growth in subscriptions. Like the ecommerce trend we talked about last week, that trend to cord cutting had been growing but the lockdowns forced ten years’ of growth into one and boosted the theme.
In years past, the focus has been on streaming entertainment but the pandemic brought that necessity to stream education and social interactions and made this all a part of our lives. The video market is expected to reach $149 billion globally by 2026 from just $38 billion in 2018, that’s growth of more than 18% a year.
Disney+ alone has added 94.9 million subscribers in 15 months, plus another 52 million subscribers on Hulu and ESPN+, and expects almost 300 million by 2026. Netflix is expected to grow to 290 million and even lagging rivals like Amazon Prime and HBO could top hundreds of millions of subs.
And when you hear about stocks to buy in the theme, you exclusively hear about those popular stocks in the entertainment category. But the trend to video streaming is so much bigger. YouTube, the big-daddy of video streaming, has grown to more than two billion monthly users and while old timers like myself didn’t really start watching YouTube until later in life, whole generations are growing up on the platform. Almost 4-in-5 U.S. internet users under the age of 35 are active on the platform.
So in this video, I want to show you how to build a stock list of all the companies to watch in that streaming mega-trend. We’ll find all the stocks in the theme, including those undiscovered companies with the most to gain. I’ll then show you how to narrow your list and reveal the top five streaming stocks I’m watching for the biggest trend of the decade.
We’ll be using Stockcard.io to start our stock search and there’s a couple of ways I like to use the platform. I can go here to the Discover menu option and then start typing in my theme in the search bar. The drop-down is then going to show me not only any stocks with those keywords in the company name but also groups of stocks in that theme.
Sign up on Stockcard for free and make stock-picking easy with the research tool I use! Use promo code: bowtienation for an exclusive discount!
Here we see lots of separate groups in streaming and it’s a great reminder than it’s not just video streaming but music, podcast and streaming software stocks we might want to check out. I can click on any of these and here we see I’ve got a list of 39 stocks to research in the video streaming group.
I can also go back to this Featured tab and check out the stock collections by scrolling down. We see virtual and augmented reality, space travel…both of which I’ll be doing videos on, and here we have 77 stocks in the streaming wars collection.
Again, clicking through shows me all the ratios built into these four stock cards for growth potential, operations, stock performance and valuation.
Finding Undiscovered Streaming Stocks
Now, like all the big trends I’m following I want to look not only at the headline companies, the popular stocks front-and-center of the trend, but also the ones you might not hear about as much. In streaming of course, you already know about Netflix and Disney, and it’s not that these popular stocks won’t do well. Disney is trading at all-time highs and still trading with one arm tied behind its back with the parks closed.
The idea though is to also find those undiscovered stocks that are making this streaming trend possible, will be benefitting from the theme and maybe are a little less expensive as well.
Things That I Consider When Finding Profitable Stocks
So for the five stocks to watch, I wanted to pick companies from different parts of that theme. I looked in cloud infrastructure services that help deliver the streams faster and securely. I looked in those different categories like audio and video streaming as well as the entertainment streaming services that are grabbing headlines.
I also wanted to make sure stocks in the list were growing revenue consistent with that trend in streaming growth. If streaming is growing by twenty-plus percent a year, then I want to find the companies able to leverage that growth into even faster sales growth for the shares.
And finally, I looked at user growth or market share growth for the companies. While other stocks you might watch earnings growth, for these kind of subscription services, it’s really user growth that’s most important and how they’re monetizing those users.
Top 5 Streaming Stocks for the Biggest Trend of the Decade
Our first streaming stock to buy will be familiar to all you in the Nation, Fastly, ticker FSLY, an edge cloud platform provider that helps some of the largest companies develop and deliver content over the internet.
I recommended Fastly in November 2019 and again in March, just before the shares took off for a seven-fold return. The stock has plunged since early February, still way above last year’s price but dropping 39% form the peak. Sales grew 40% year-over-year in the fourth quarter but management guided to 31% growth this year. That slowdown in growth scared investors but I think this is still a great stock that takes advantage of the theme and I’m using the selloff to pick up more shares.
Management’s guidance for $380 million in 2021 sales means the stock now trades for 21-times sales, down from trading at 40-times sales last year. That’s still not cheap but Fastly is an innovator in a $35 billion market for app services, security, CDN and streaming. It’s taking market share from the legacy providers and will grow into that valuation.
The company has a great balance sheet with over $400 million in cash against just $32 million in debt. It’s got all the cash it needs to acquire or develop the tools to keep up that growth.
Like a lot of these growth stocks, shares of Fastly will follow the market higher and lower so there could still be more pain if stocks continue to selloff but this one is part of my big trends portfolio and should keep moving higher over the longer-term.
Next here is a competitor to Fastly, Akamai Technologies, ticker AKAM, and this is one of the legacy content delivery networks but a strong value play in the theme and some strong catalysts for growth.
The company has more than 300,000 servers in 4,000 locations and nearly a thousand cities worldwide, so it has a scale that Fastly just can’t touch yet. The shares kind of flat-lined over the five years to 2019 on weakness in CDN business as some of its biggest customers brought their delivery networks in-house but that decline has stopped and growth is back with this trend in streaming.
Now Akamai is also offering cybersecurity solutions which is growing at 30% annually and grew to a billion in 2020 revenue. It’s been able to build on that customer base and the margins are higher than the CDN business.
Overall revenue growth is 10% annually but it’s building out the segments that are taking that higher. Security is growing at 30% and edge applications at 23% a year. Shares trade for just 4.9-times sales and this is one of the few in the theme with analyst targets well above the current price. Analysts have an average target of $116 per share, about 21% above the current price.
Next, I wanted to highlight a gaming platform and Huya Inc, ticker HUYA, the largest livestream gaming platform in China.
Gaming is where the real growth has been over the last few years but I feel like it’s just coming into the monetization so we could see revenue on these platforms take off.
Revenue is growing at 24% annually and the company is already profitable with 75% earnings growth in the last quarter. Average monthly users were up 18% annually to 173 million in the most recent quarter with six million premium users. The balance sheet is very strong here with $1.6 billion in cash and short-term investments and no debt. That’s 24% of the market value of shares in cash.
Spotify, ticker SPOT, is better known as a music streamer but also has a catalyst in video streaming.
Spotify is by far the largest music streaming provider with 155 million subscribers and 345 million monthly users in 170 markets. The company reported 27% user growth last quarter and revenues up 17% year-over-year.
Spotify has been aggressively adding podcasts over the last year, signing exclusive deals with Joe Rogan and the Duke and Duchess of Sussex, and then being able to monetize them through ads or that premium service. It’s now making a big push into video streaming of the podcasts that could be the next catalyst for the shares.
Management has given 2021 guidance of up to 427 million users, which would be growth of 24%, and $11.5 billion in revenue. That puts the shares at just over five-times on a price to sales basis, so one of the cheaper on the list.
As a HUGE nerd for Marvel, I couldn’t talk about streaming without taking about Disney, ticker DIS.
Honestly, I was a holdout on the video subscription services but Disney has the franchises that you just have to watch. Considering it’s signed up almost 100 million subscribers to Disney-plus in barely a year and forecasts are for growth to 300 million over the next few years, that’s growth you can’t ignore as an investor.
Revenue was down 22% in the first quarter to $16.2 billion but that’s on a 53% plunge in the parks and experiences division. With the return of parks and the studio revenue, sales are expected to jump 25% to $85.9 billion next year. That’s still another year out but makes the stock a value play for anyone with the patience to wait.
Follow these and all the stocks in our 2021 Bow Tie Nation portfolio on Stockcard. Use promo code bowtienation for a special discount beyond the free trial!
Leave a Reply