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4 Stocks to Watch as Streaming Services Continue to Explode

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The pandemic has changed several things over the past one year — from working and learning at home to the way people shopped or their mode of entertainment. This saw user growth soaring for video streaming services in 2020.

In fact, the top video streaming services have been reporting a surge in user growth over the past few months, as movie theatres remain closed, battering the media companies. On Jan 19, Netflix, Inc. (NFLX - Free Report) reported that its subscribers surpassed 200 million by the end of 2020. Not only Netflix but also other big players have been witnessing the same, which has been giving a boost to their revenues.

Netflix Leads the Race

Netflix said on Jan 19 that its subscribers grew by 8.51 million in the fourth quarter of 2020 to hit 203.66 million, beating its own estimates of 6 million new users. Following this, shares of the streaming giant jumped as much as 13% on Tuesday.

Understandably, with no other option left for outdoor entertainment, people are subscribing to video streaming services, thus adding new subscribers and driving revenues. Not only Netflix, the story has been the same with most other big streaming service providers. Moreover, a number of new streaming services were launched just months ahead of or during the pandemic, which gave people further options to choose from.

The Walt Disney Company’s (DIS - Free Report) Disney+ was launched only in 2019, a few days after Apple, Inc. (AAPL - Free Report) launched Apple TV+. However, it didn’t take long for both the companies to attract subscribers. Interestingly, Disney didn’t displace existing services but continued to grow its subscriber base.

Streaming Services Poised to Gain  

According to a Wall Street Journal analysis of data from market-research firms MoffettNathanson LLC and HarrisX, the biggest streaming services in the United States are expected to finish the year with a combined user number of more than 50% from the previous year.

Interestingly, the analysis says that instead of biting into each others’ subscribers, it was a year of coexistence for video streaming companies. Moreover, according to a new Deloitte survey, U.S. consumers on average subscribed three services at the beginning of 2020, which increased to five by October.

Around 23% of the subscribers said that they added one service at the onset of the pandemic. However, the report also mentions that by October, around 46% had given up a minimum of one service in the last six months. This shows that consumers are spoilt for choice with more players now in market.

This, at the same time, reflects the growing competing among the competitors. That said, on average, U.S. households now have 3.1 streaming services compared to 2.7 in 2019, according to Kagan, a media research group within S&P Global Market Intelligence, as reported in WSJ.

Stocks in Focus

Streaming services are among the rare few benefiting from the coronavirus pandemic, which has kept billions of people at home with nothing to do but stream. This thus makes an opportune time to invest in video and music streaming stocks.

Apple, Inc. launched its streaming services in 2019 and has gained immense popularity since then. The company reportedly has more than 30 million TV subscribers. The company last year also announced that it will also be offering a bundled service in the near term, which is likely to further boost its subscriber figures.

The company’s expected earnings growth rate for the current year is 22.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 30 days.  Apple carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Netflix, Inc. is considered a pioneer in the streaming space. It has been spending aggressively on building its original show portfolio. The company added .51 million in the fourth quarter of 2020 to hit 203.66 million.

The company’s expected earnings growth rate for the current year is 48.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 30 days.  The company currently has a Zacks Rank #3 (Hold).

Amazon.com, Inc. (AMZN - Free Report) , besides being an e-commerce giant, offers several other services. Amazon Prime Video, a membership program, provides access to streaming of movies and TV episodes among other services, and is one of the market leaders in the streaming space. 

The company’s expected earnings growth rate for the current year is 50.3%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 60 days.  Amazon carries a Zacks Rank #3.

Comcast Corporation’s (CMCSA - Free Report) Peacock video streaming service has already gained more than 10 million paid subscribers in less than a month after its launch. Peacock has three tiers of service: Free, Premium and Premium Plus. Peacock also offers a lineup of around 25 curated digital linear channels, featuring long-form and digital-originated programming content from NBCUniversal's broadcast and cable properties as well as third-party content providers.

The company’s expected earnings growth rate for next year is 15.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. It carries a Zacks Rank #3.

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