Streaming stocks received a massive boost during the novel coronavirus pandemic. Millions of people pay monthly subscription fees to access movies, TV shows, podcasts and music wherever and whenever they want. Gone are the days of renting movies at your local video store.
Overall, it’s a business model that provides predictable, recurring revenue to companies and has proven extremely popular with consumers. Grand View Research estimates that the global video streaming market was worth more than $50 billion in 2020, and forecasts that it will expand at a compound annual growth rate (CAGR) of 21% between 2021 and 2028.
With such strong growth potential, it should come as no surprise that more and more companies are racing to bring streaming services online. Even companies such as Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) — whose core businesses have nothing to do with streaming content — are beefing up their offerings to grow their revenues and enhance their profitability. Amazon underscored this fact with its recently completed $8.5 billion acquisition of MGM Studios, which gives it ownership of popular film franchises such as James Bond and Rocky, among others.
So, with streaming growing in popularity, let’s take a look at three streaming stocks that are screaming buys right now.
Now, let’s dive in and analyze each one.
Streaming Stocks to Buy: Netflix (NFLX)
We’ll start with the elephant in the room: Netflix. For nearly a decade, Netflix seemed to be the only streaming game in town. Not anymore, though.
In its most recent earnings report, which disappointed Wall Street, Netflix acknowledged for the first time that its growth is being challenged by a slew of competitors. The company provided weak forward guidance, saying that it expects to add 2.5 million subscribers in the first quarter. This is substantially less than the four million subscribers added in the same quarter last year. In turn, concerns over slowing growth are largely responsible for NFLX stock falling 35% year-to-date (YTD) to $391.82 per share.
Furthermore, NFLX stock is now trading at the same level it was in April 2020 right after the coronavirus pandemic arrived. The share price has effectively done a round trip over the past two years, erasing all the gains achieved during the pandemic when people were stuck at home. Yet, the selloff has attracted a number of prominent investors who see an opportunity at the stock’s current level. Chief among them has been billionaire hedge fund manager Bill Ackman, who took a $1.1 billion stake in the streaming giant earlier this year.
So, while NFLX stock may be down, the outlook is still bright — and therefore, makes it one of the top streaming stocks available. The median price target on Netflix stock is $502.59, implying 28% upside from current levels.
Walt Disney (DIS)
Speaking of beaten-up streaming giants, how about Walt Disney? Similar to Netflix, the company has also taken a drubbing in recent months as it too has reported slowing subscriber growth.
After adding more than 100 million subscribers in its first two years of operation, Disney said that its streaming service is seeing growth start to moderate. And at the end of 2021, the firm reported it had 129.8 million paying customers globally, good for year-over-year (YOY) growth of 37%.
Moreover, Disney says it expects its Disney+ streaming service to have 230 million to 260 million paying subscribers by 2024, the year in which the service is expected to become profitable. Disney also continues to invest heavily in new content for the streaming platform, with plans to spend $33 billion on new programming this year alone, which is $8 billion more than it invested in 2021.
Yet, despite the growth and spending on new content, DIS stock has been pushed lower by investors who feel that the growth is not as strong as it should be. YTD, DIS stock is down 8% to $142.38 a share. And over the past six months, the share price has dropped 18%.
However, analysts see brighter days ahead for DIS stock. The median price target on the shares is $191 per share, which would be 34% higher than where the stock currently sits. Thus, investors should keep an eye on this one as a top buy among streaming stocks.
Streaming Stocks to Buy: Spotify (SPOT)
When it comes to streaming stocks, it’s not all movies and TV shows. Streaming also involves music and podcasts, and in that arena, Spotify reigns supreme.
At the end of last year, the Stockholm, Sweden-based company had 406 million monthly active users around the world, up 18% YOY and up nearly 100% from 2018 when the company counted 207 million monthly active users. Additionally, premium subscribers, who pay extra for ad-free music streams, stood at 180 million at the close of 2021 — an annualized increase of 16%. Premium subscribers have also nearly doubled from three years ago. And overall, Spotify is the undisputed leader in audio streaming with an estimated 31% global market share.
However, while these metrics are impressive, SPOT stock has also pulled back sharply this year. Nearly three full months into 2022, Spotify shares are down 33% at $157.31. The big selloff comes in the wake of a highly publicized controversy with podcast host Joe Rogan, whose stance against Covid-19 vaccines and racially charged language prompted legendary musicians such as Neil Young and Joni Mitchell to pull their music catalogues from the streaming service, and led to a backlash among consumers. Spotify, which has a deal in place that pays Joe Rogan $200 million, has stuck by the controversial podcaster to the detriment of the share price.
Regardless, the consensus view on Wall Street seems to be that the selloff in SPOT stock has been overdone. The median price target on the shares among 23 professional analysts who cover the company is $240.42, which would be 53% higher than current levels.
On the date of publication, Joel Baglole held a long position in DIS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.