Over the past ten years, consumers have been cutting the cord on cable and tossing out their satellite dishes in favor of streaming services. Last year, the pandemic accelerated this trend, with many people forced to stay at home. As a result, media companies have been jumping into the streaming wars with their own services.
While most streaming stocks saw huge gains last year, this trend isn’t expected to end anytime soon. Across the world, more people pay for streaming subscriptions than cable TV. Why pay for cable when you can watch shows or movies from any place at any time, from an internet-based library of content.
There are so many different streaming services now that there is something for everybody. That’s why investors need to pay attention to streaming stocks. The industry will continue to grow. But not all of these services will be winners when all is said and done. This is why we need to focus on great long-term buys, which is why I am recommended Buy-rated streaming stocks Amazon.com, Inc. (AMZN), Netflix Inc. (NFLX), and AMC Networks Inc. (AMCX).
Amazon.com, Inc. (AMZN)
While AMZN is known as one of the largest e-commerce providers globally and the dominant name in the cloud-computing market, its Prime Video service is one of the top streaming services in the country. Its content library includes a vast selection of movies, TV shows, and original content. Luckily, the streaming service is free for Prime subscribers.
Unlike other streaming stocks, where streaming is the primary business model, AMZN uses Prime Video as a benefit to lure in more Prime subscriptions. Its online retail business essentially revolves around its Prime program, so the more benefits the subscription offers, the more subscribers the company gets. And the more subscribers the company gets, the more revenue it has coming in.
In fact, AMZN has been investing considerably into video content just to prove to consumers they can get anything they want with a PRIME subscription. The company has an overall grade of B, which translates into a Buy rating in our POWR Ratings service. AMZN has a Growth Grade of B, which isn’t surprising as analysts expect earnings to rise 15.7% in the current quarter.
The company also has a Sentiment Grade of A, which means it is well-liked by Wall Street analysts. According to the POWR Ratings Price Target feature, forty-five analysts rate AMZN a Strong Buy or Buy. We also grade AMZN based on Value, Momentum, Stability, and Quality. You can find those grades here. AMZN is ranked #7 in the Internet Industry. You can find other top stocks in the industry here.
Netflix Inc. (NFLX)
While AMZN has a lot of subscribers, NFLX is the pioneer in the streaming space. The company evolved from a DVD-rental service to the dominant streaming provider. This due to its massive portfolio of content across multiple languages. Like AMZN, it is spending quite aggressively on its original content. This should help the company maintain its leading position against newcomers.
It should also maintain its growth as it is expanding its international footprint with more foreign-language content. The company has made partnerships with companies like Telefonica in Spain and KDDI in Japan to enhance its subscriber base. NFLX caters to multiple audiences with content in various genres, which broadens its appeal to a wide range of people.
The company has an overall grade of B, which is a Buy rating in our POWR Ratings service. NFLX has a Sentiment Grade of B, which means the “Smart Crowd” favors the stock. For instance, analysts have set an average price target of $609.95 for the stock, which is over 20% higher than its current price. The company also has a Quality Grade of B, which means it has a solid balance sheet.
NFLX had $8.4 billion in cash as of the end of March, compared to only $699 million in short-term debt. The company is also highly efficient, with a return on equity of 29.2%. To access the rest of NFLX’s grades (Growth, Value, Momentum, and Stability), click here. NFLX is ranked #9 in the Internet industry.
AMC Networks Inc. (AMCX)
A newcomer to the streaming space is AMCX. The company owns several cable networks, such as its flagship AMC channel, WE tv, BBC America, IFC, and SundanceTV. The AMC channel originally had classic movies on its programming schedule until it released the critically acclaimed TV show, Mad Men. This was followed by its most popular show, The Walking Dead.
Over the last ten years, the company has shifted to original programming, which has set the stage for its streaming offerings. The company launched streaming services Shudder and Acorn TV in 2015 and 2013, respectively. Shudder focuses on horror, while Acorn broadcasts content from the U.K. They now have multiple streaming services, including Sundance Now, AllBlk, and AMC+, which I believe offers the most significant growth potential.
Unlike other streaming companies, AMCX offers these services through distributors such as cable operators, satellite providers, and cable stick players like the Roku (ROKU). While its streaming subscribers pales in comparison to NFLX and others, its small stature offers significant growth potential. The company has an overall grade of B, translating into a Buy rating in our POWR Ratings service.
AMCX has a Growth Grade of B, which makes sense as earnings are expected to soar 27.2% in its upcoming earnings report. The company also has a Value Grade of B as its forward P/E is a paltry 6.43. We also provide the following grades for AMCX: Momentum, Stability, Sentiment, and Quality. You can access those here. AMCX is ranked #2 in the Entertainment – Media Producers industry. You can find more top stocks in this industry by clicking here.
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AMZN shares fell $36.49 (-1.08%) in premarket trading Tuesday. Year-to-date, AMZN has gained 2.86%, versus a 11.59% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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