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Netflix & 3 More Content Stocks to Ride Global Uncertainties
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Faster Internet speeds and devices like smartphones and tablets have changed the face of not only communication but also that of the broadcast and TV industry. Even the radio market has evolved substantially to keep up with the changing trends.
Traditional cable and radio providers are gradually being replaced by over-the-top content providers. Streaming video and audio (including music) services are becoming popular among the younger generation who seek instant access and instant gratification.
While we expect that the streaming companies are here to stay (yes, even with Gen Z), investing in them might be a bit tricky. Competition is rife as everyone wants a bigger share of the pie. Moreover, in the past few years, there have been a lot of new entrants in the market like Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) and Pandora among others.
Global political and economic changes also have a profound impact on these companies. Dishing out content that is in tune with the latest happenings contributes significantly to viewership. Recently, the Brexit mandate - the exit of Britain from the EU - has rattled the global economy. On the other hand, the U.S. is gearing up for its presidential elections, which again will lead to a lot of changes.
But it’s important to keep in mind that even in these difficult times, there are some stocks that defy the conventional bears.
One such stock is video streaming giant Netflix (NFLX - Free Report) , which recorded a gain of over 129% in 2015 in contrast to a decline of 0.7% in the S&P 500 index. And mind you, 2015 was one of the most difficult years after the great recession of 2008.
So What Sets Netflix Apart?
Netflix has been smart enough to play to its strength and generate the kind of content that users demand. A rapid international expansion strategy and efforts to improve its original content have indeed been paying off.
In fact, the company is now all set to increase prices for its older customers. Netflix appears to be well poised on the growth track despite the price increase largely because its original programming manages to keep users hooked on to it. Netflix has strategically formed its own niche, catering to new-age users who want to watch as per their own convenience and sometimes prefer binge-watching.
This Zacks Rank #2 (Buy) company added 6.7 million new members in the first quarter of 2016, taking the total to over 81.5 million subscribers.
There is no doubt that Brexit will have some negative impact on the stock as the markets correct themselves, but over the long run, we believe the streaming giant will benefit from the changing trends.
Apart from Netflix, investors can also have a look at these Broadcast Radio/TV stocks, which seem promising at the moment:
Discovery Communications, Inc.: This prominent original and purchased programming company in the U.S. has a Zacks Rank #1 (Strong Buy). The company has a presence in more than 220 countries across the globe but it derives more than 50% of its total revenues from the U.S. market alone, which is still registering growth.
In the first quarter of 2016, Discovery Communications’ sales in the U.S. jumped 8% over the past year quarter to $807 million, driven by strength in both distribution and advertising revenues.
We remain optimistic about the company’s performance considering its strong product portfolio and strategic collaborations with the likes of Hulu and Sony. The company also claims to have a decent currency hedging program, which should cushion its financials in times of such macroeconomic turmoil. Moreover, this stock is also a great bet on the valuation front.
Salem Media Group (SALM - Free Report) : This U.S. based multimedia company operates in the radio, digital media and book, magazine and newsletter publishing space. This Zacks Rank #2 (Buy) company operates 116 local radio stations with 71 of these in top 25 media markets.
We believe that this company is well positioned to gain from the forthcoming U.S. national elections. As the battle between Donald Trump and Hillary Clinton heats up, Salem Media has placed itself well to gain from all the political radio ad buying going on.
Sirius XM Holdings Inc. (SIRI - Free Report) : This satellite radio services provider mainly operates in the U.S. and Canada, which immunes it to some extent from international macroeconomic uncertainties like Brexit.
This Zacks Rank #2 stock has delivered profits for 21 consecutive quarters and has already seen some impressive subscriber addition in 2016. This led it provide an encouraging guidance for the year.
A major positive in our view is the company’s move to increase its stake in its Canadian unit to 70% from 37%. The transaction has the potential to boost the company’s growth substantially because of the higher license fees paid by the Canadian unit.
Macroeconomic changes, as huge as Brexit, will undoubtedly impact all the markets, but in varying degrees. Nonetheless, we can use this time to add positions and bet on the stocks that have in them what it takes to sail through choppy waters.
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Netflix & 3 More Content Stocks to Ride Global Uncertainties
Faster Internet speeds and devices like smartphones and tablets have changed the face of not only communication but also that of the broadcast and TV industry. Even the radio market has evolved substantially to keep up with the changing trends.
Traditional cable and radio providers are gradually being replaced by over-the-top content providers. Streaming video and audio (including music) services are becoming popular among the younger generation who seek instant access and instant gratification.
While we expect that the streaming companies are here to stay (yes, even with Gen Z), investing in them might be a bit tricky. Competition is rife as everyone wants a bigger share of the pie. Moreover, in the past few years, there have been a lot of new entrants in the market like Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) and Pandora among others.
Global political and economic changes also have a profound impact on these companies. Dishing out content that is in tune with the latest happenings contributes significantly to viewership. Recently, the Brexit mandate - the exit of Britain from the EU - has rattled the global economy. On the other hand, the U.S. is gearing up for its presidential elections, which again will lead to a lot of changes.
But it’s important to keep in mind that even in these difficult times, there are some stocks that defy the conventional bears.
One such stock is video streaming giant Netflix (NFLX - Free Report) , which recorded a gain of over 129% in 2015 in contrast to a decline of 0.7% in the S&P 500 index. And mind you, 2015 was one of the most difficult years after the great recession of 2008.
So What Sets Netflix Apart?
Netflix has been smart enough to play to its strength and generate the kind of content that users demand. A rapid international expansion strategy and efforts to improve its original content have indeed been paying off.
In fact, the company is now all set to increase prices for its older customers. Netflix appears to be well poised on the growth track despite the price increase largely because its original programming manages to keep users hooked on to it. Netflix has strategically formed its own niche, catering to new-age users who want to watch as per their own convenience and sometimes prefer binge-watching.
This Zacks Rank #2 (Buy) company added 6.7 million new members in the first quarter of 2016, taking the total to over 81.5 million subscribers.
There is no doubt that Brexit will have some negative impact on the stock as the markets correct themselves, but over the long run, we believe the streaming giant will benefit from the changing trends.
NETFLIX INC Price and Consensus
NETFLIX INC Price and Consensus | NETFLIX INC Quote
Apart from Netflix, investors can also have a look at these Broadcast Radio/TV stocks, which seem promising at the moment:
Discovery Communications, Inc.: This prominent original and purchased programming company in the U.S. has a Zacks Rank #1 (Strong Buy). The company has a presence in more than 220 countries across the globe but it derives more than 50% of its total revenues from the U.S. market alone, which is still registering growth.
In the first quarter of 2016, Discovery Communications’ sales in the U.S. jumped 8% over the past year quarter to $807 million, driven by strength in both distribution and advertising revenues.
We remain optimistic about the company’s performance considering its strong product portfolio and strategic collaborations with the likes of Hulu and Sony. The company also claims to have a decent currency hedging program, which should cushion its financials in times of such macroeconomic turmoil. Moreover, this stock is also a great bet on the valuation front.
DISCOVERY COM-A Price and Consensus
DISCOVERY COM-A Price and Consensus | DISCOVERY COM-A Quote
Salem Media Group (SALM - Free Report) : This U.S. based multimedia company operates in the radio, digital media and book, magazine and newsletter publishing space. This Zacks Rank #2 (Buy) company operates 116 local radio stations with 71 of these in top 25 media markets.
We believe that this company is well positioned to gain from the forthcoming U.S. national elections. As the battle between Donald Trump and Hillary Clinton heats up, Salem Media has placed itself well to gain from all the political radio ad buying going on.
SALEM MEDIA GRP Price and Consensus
SALEM MEDIA GRP Price and Consensus | SALEM MEDIA GRP Quote
Sirius XM Holdings Inc. (SIRI - Free Report) : This satellite radio services provider mainly operates in the U.S. and Canada, which immunes it to some extent from international macroeconomic uncertainties like Brexit.
This Zacks Rank #2 stock has delivered profits for 21 consecutive quarters and has already seen some impressive subscriber addition in 2016. This led it provide an encouraging guidance for the year.
A major positive in our view is the company’s move to increase its stake in its Canadian unit to 70% from 37%. The transaction has the potential to boost the company’s growth substantially because of the higher license fees paid by the Canadian unit.
SIRIUS XM HLDGS Price and Consensus
SIRIUS XM HLDGS Price and Consensus | SIRIUS XM HLDGS Quote
To Sum Up
Macroeconomic changes, as huge as Brexit, will undoubtedly impact all the markets, but in varying degrees. Nonetheless, we can use this time to add positions and bet on the stocks that have in them what it takes to sail through choppy waters.